Barriers and Facilitators of FDI in Asia: A Quantile Approach to Regional Trends

Abstract

This paper investigates the drivers of FDI inflows in 34 Asian countries from the period 2000 to 2021, using a quantile regression approach to take care of heterogeneity across low-, medium-, and high-FDI-receiving nations. The current analysis identifies economic growth, labor force participation, trade costs, sustainable energy consumption, and infrastructure development as significant factors that influence FDI. While GDP growth and workforce participation have been observed to positively influence FDI inflows, strong economic and labor policies become relevant in this context. In contrast, high trade costs come up as bottlenecks and hence require trade facilitation and regional market integration. The sustainable energy consumption can be seen as a representation of the rising importance of environmental considerations in attracting investment, and this is mixed with evidence on governance effectiveness and interactions with sustainable energy policies regarding institutional quality in FDI dynamics. The findings suggest that a multidimensional policy framework of economic growth, labor market reforms, trade cost reduction, infrastructure improvement, and governance improvement go a long way in the creation of an enabling environment for FDI.

Keywords: FDI, Economic Growth, Trade Costs, Sustainable Energy, Infrastructure, Governance, Quantile Regression