Determinants of Foreign Direct Investment in ASEAN: Evidence from ASEAN 4 (Cambodia, Laos, Myanmar, and Vietnam)

Most developing countries in the world are working hard to attract more foreign direct investment. Identifying the key determinants of foreign direct investment is therefore seen as an essential task for policy makers. Compared to other parts of the world, the performance of ASEAN countries in attracting foreign direct investment is still poor. This study deals with identifying the determinants of foreign direct investment inflow in ASEAN 4 (Cambodia, Laos, Myanmar, and Vietnam) countries. This study estimates the panel data sample with pooled OLS and fixed and random effect models. The analyzed data covered for the period 2000 to 2020. The empirical results indicate that market size and natural resources are the most robust determinants for FDI inflows into Cambodia, Laos, Myanmar, and Vietnam. Furthermore, the presence of labor costs, infrastructure, and exchange rate exerts a favorable influence on the inflow of FDI to CLMV countries. On the contrary, the findings of the paper reveal that the inflation rate has a detrimental effect on inward FDI. This partly reflects the fact that most of the world’s FDI is market-seeking. This study provides a clear understanding of the scope of the research in the field of FDI determinants as the practical implication for future research.