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Foreign direct investment effect on East Asian productivity

ELSADIG MUSA AHMED, MULTIMEDIA UNIVERSITY, MALAYSIA

Abstract: This study empirically measures the impact of foreign direct investment (FDI) on productivity of ASEAN5 (Malaysia, Indonesia, Philippines, Singapore and Thailand) plus 2 (China and South Korea). Analytical interpretations in this paper have successfully corrected the defects of the predecessor study through a statistical estimation by way of arriving at the coefficients of the explanatory variables being used by econometric approach. A second step in a routine procedure has effectively plugged the parameters of the variables into a modified model in order to calculate the growth rates of productivity indicators being used by growth accounting. The examination envisages a key finding that the productivity growth of the aforesaidASEAN5 and China has been ‘input-driven’. However, South Korea is moving towards productivity driven. As reflected from the comparison among the results of total factor productivity (TFP) growth. The study also exposes a fact that the impact of FDI has been positive in the countries under considerations.
Keywords: ASEAN5 plus 2; FDI; TFP growth; input-driven.

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