Ease of Doing Business and FDI Inflows in ASEAN

The paper first conducts an analysis of the patterns and trends in the business regulatory systems in ASEAN countries over time, which reveals the effectiveness of the regulations and the ease of doing business (EDB) across ASEAN. After sorting out the relevant business regulatory and control variables from a large set of measures, the determinants of intra-ASEAN and extra-ASEAN foreign direct investment (FDI) inflows are empirically examined. Particular consideration is given to the relative importance and effect of EDB measures on FDI attraction. Evidence is found that efficient business regulations are significant FDI determinants. Moreover, it is revealed that business regulatory efficiency is interrelated with other country attributes reflecting efficiency, sophistication, and quality. Overall, our study highlights the importance of business regulatory reforms in establishing an entrepreneurship-friendly environment and inducing increased FDI inflows in ASEAN countries.