Open-ended impact of afta on fdi inflows: Evidence from macro-level data of indonesia, malaysia, thailand and firm-level data of indonesia

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Abstract

This study attempts to observe the ASEAN economic integration progressbased on the impact of ASEAN Free Trade Area (AFTA) on FDI inflows ofboth multi-country (Indonesia, Malaysia and Thailand) with macroeconomyleveldata and single country (Indonesia) with micro firm-level data.Macroeconomy level data uses macroeconomy data set with time-dummyvariable of ‘before and after’ the comprehensive implementation of AFTA asthe representation of AFTA. Micro firm-level data utilizes Indonesia’smanufacturing survey of 25,696 firms under the International Standard of Industrial Classification digit 5 (ISIC-5) with the ASEAN’s Common EffectivePreferential Tariff (CEPT) of 19,425 tariff rates data as the representation of AFTA. The form of the macro-level data is longitudinal and the form of the micro-level data is cross-sectional. From the multi-country analysis this study finds that AFTA is not effective in attracting FDI inflows while from the single-country analysis it finds the opposite. These findings prove that the impact of AFTA on FDI inflows in ASEAN is open-ended and varies within member states.

Original languageEnglish
Pages (from-to)91-124
Number of pages34
JournalJournal of Economic Cooperation and Development
Volume36
Issue number2
Publication statusPublished - 1 Jan 2015

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