The Triad in Southeast Asia: What Determines U.S., EU and Japanese FDI within AFTA?

By estimating three panel data models, the paper examines empirically the determinants of outward FDI of each Triad economy within the AFTA regional integration area over the 1995–2004 period. From the AFTA members’ perspective, our econometric analysis provides information on the deterministic factors of inward FDI within AFTA originating from the United States, EU, and Japan. Our findings indicate that the FDI determinants and their relative importance differ to a considerable extent across the Triad. In general, however, international integration-related factors (such as the host country’s degree of openness to the international economy and the importance of bilateral trade relations between the home and host country) as well as market-related factors (such as the host country’s market size and the host country’s degree of intra-AFTA market accessibility) are found to be the most important location determinants.