Corruption and Foreign Direct Investment (FDI) in ASEAN-5 : A Panel Evidence

Bakri, Bin Abdul Karim and Zulkefly, Bin Abdul Karim and Mohamad Naufal, Bin Nasharuddin (2019) Corruption and Foreign Direct Investment (FDI) in ASEAN-5 : A Panel Evidence. Economics and Finance in Indonesia, 64 (2). pp. 145-156. ISSN 2442-9260

[img] PDF
Corruption and Foreign Direct Investment (FDI) in ASEAN-5 ; A Panel - Copy.pdf

Download (184kB)
Official URL: http://efi.ui.ac.id/index.php/efi/index

Abstract

This paper examines the effects of corruption on the inflow of FDI in ASEAN-5 countries by controlling two macroeconomic variables namely Gross Domestic Product (GDP) and inflation. Using a static panel data estimation, the results show the significant relationship between corruption and Gross Domestic Product (GDP) on the inflow of FDI in ASEAN-5. This results indicate that less corrupted countries and larger market size would attract more FDI inflows. The policy implications from this study suggests that ASEAN-5 governments need to have concerted and continues efforts in improving the integrity and credibility of their administration and transactions. In addition, maintaining their sustainable of economic growth is also crucial as a full factor in attracting more FDI inflows in future.

Item Type: E-Article
Additional Information: Akcay, S 2001, ‘Is corruption an obstacle for foreign investors in developing countries? A cross-country evidence’, Yapi Kredi Economic Review, vol. 12, no. 2, pp. 27–34. Akca, H., Ata, A. Y., & Karaca, C 2012, ‘Inflation and corruption relationship: Evidence from panel data in developed and developing countries’, International Journal of Economics and Financial Issues, 2(3), 281-295. Alesina, A., & Weder, B., 1999. ‘Do corrupt governments receive less foreign aid?’, Working Paper No. 7108. National Bureau of Economic Research. Arellano, M 2003, Panel Data Econometrics. New York: Oxford University Press. Asilis, C., & Ramon, H., 1994. On corruption and capital accumulation. IMF Working Paper, No. 94/86. Azam, K., & Aznor, A 2013, ‘The effects of corruption on FDI inflows: some empirical investigation from less developed countries’, Journal of Applied Science Research, vol. 9 no. 6, pp. 3462-3467. Balasubramanyam, V., Salisu, M., and Sapsford, D 1996, ‘Foreign direct investment and growth in EP and IS countries’, Economic Journal, vol. 106, no. 434, pp. 92-105. Berlinger, J 2012, ‘Why china should study Singapore‟s anti- corruption strategy. Business Insider’. Retrieved from http://www.businessinsider.com.au/why-china-should-study-singapores-anti- corruption-strategy-2012-12. Borensztein, E 1998, ‘How does foreign direct investment affect economic growth?’, Journal of International Economics, vol. 44, pp. 115-135. Bouoiyour, J. (2003). Foreign direct investment in Morocco. MPRA Paper, University Library of Munich, Germany. Retrieved from http://core.ac.uk/download/pdf/6581600.pdf Busse, L., Ishikawa, N., Mitra, M., Primmer, D., Surjadinata, K., & Yaveroglu, T., 1996. ‘The perception of corruption: A market discipline approach. Goizueta Business School Working Paper. Atlanta. Emory University. Cassou, SP 1997, ‘The link between tax rates and foreign direct investment’, Applied Economics, vol. 29, pp. 1295-1301. Charkrabarti, A 2001, ‘The determinants of foreign direct investment: sensitivity analyses of cross-country regressions’, Kyklos, vol. 54, no. 1, pp. 89-114. Cuervo-Cazurra, A 2006, ‘Who cares about corruption?’, Journal of International Business Studies, vol. 37, pp. 807–822. De Mello, LR 1997, ‘Foreign direct investment in developing countries and growth: A selective survey’, Journal of Development Studies, vol. 34, no. 1, pp. 1-34. De Mello, LR 1999, ‘Foreign direct investment led-growth: Evidence form time series and panel data’, Oxford Economic paper, vol. 51, pp. 133-151. Djankov, S., La Porta, R., Lopez-de-Silanes, F., & Shleifer, A 2002, ‘The regulation of entry’, Quarterly Journal of Economics, vol. 67, no. 1, pp. 1-37. Drabek, Z., & Payne, W., 1999. ‘The impact of transparency on foreign direct investment’. Staff Working Paper ERAD-99-02. Geneva, Switzerland: World Trade Organization. Edwards, S. 1990. ‘Capital flows, foreign direct investment, and debt-equity swaps in developing countries’. Working Paper No. 3497. National Bureau of Economic Research. Francis, L., Sam, S., & Magaret, A 1998, ‘The corruption process of a law enforcement officer: A paradigm of occupational stress and deviancy’, Journal of The American Academy of Psychiatry and Law, vol. 26, no. 3, pp. 433-458. Gupta, S 1998. ‘Does corruption affect income equality and poverty?’, IMF Working Paper, No. 98/76. Gray, C. and Kaufmann, D 1998, ‘Corruption and Development’. http://www.worldbank.org/fandd/englis/0398/articles/020398.htm) Habib, M., & Zurawicki, L 2001, ‘Country-level investments and the effect of corruption-Some empirical evidence’, International Business Review, vol. 10. No. 6, pp. 687–700. Habib, M., & Zurawicki, L 2002, ‘Corruption and foreign direct investment’, Journal of International Business Review, vol. 33, no. 2, pp. 291–307. Han, K. 2006. ‘Corruption and foreign direct investment’. Paper presented at the annual meeting of the International Studies Association, Town & Country Resort and Convention Center, California, USA, Mac 22 2006. Huntington, S 1968, Political Order in Changing Societies. New Haven, CT: Yale University Press. Ismail, NZ 2009, ‘The Determinant of Foreign Direct Investment in ASEAN: A Semi-Gravity Approach’, Transition Studies Review, vol. 16, pp. 710–722. Jordaan, JC 2004, ‘Foreign direct investment and neighboring influences’. PhD thesis, University of Pretoria, South Africa. Kemsley, D 1998, ‘The effect of taxes on production location’, Journal of Accounting Research, vol. 36, pp. 321-341. Magnus, J., & Fosu, E., 2006. ‘Bivariate causality analysis between FDI inflows and economic growth in Ghana’. Paper presented at the 3rd African Finance Journal Conference, Accra, Ghana, 12-13 July 2006. Maliszewski, W. S., 2010. ‘Vietnam: Bayesian estimation of output gap’. IMF Working Paper 10/149. Washington, DC: International Monetary Fund. Martini, M 2012, Causes of corruption in Indonesia. Berlin, Germany: Transparency International. Metaxas, T. & Kechagia, P 2016, ‘FDI in Central Asia: The Case of Uzbekistan’, Applied Econometrics and International Development, vol. 16, no. 1, pp. 63-76. Mistry, J.J. and Jalal, A 2012, ‘An empirical analysis of the relationship between e-government and corruption’, The International Journal of Digital Accounting Research, vol. 12, no. 18, pp. 145-76. Mottaleb, K. A., & Kalirajan, K 2010, ‘Determinants of foreign direct investment in developing countries a comparative analysis’, The Journal of Applied Economic Research, vol. 4, no. 4, pp. 369-404. Mouro, P 1995, ‘Corruption and growth’, The Quarterly Journal of Economics, vol. 110, no. 3, pp. 681-712. David, Dan Ben; Nordström, Håkan; Winters, L. Alan, 1999. ‘Trade, income disparity and poverty’. WTO Special Studies, No. 5, ISBN 9287012113, World Trade Organization (WTO), Geneva Nuryyev, G. & Hickson, C 2015, ‘Corruption Centralization, Investments, and Growth: Analysis of 62 countries for 1995-2007’, Applied Econometrics and International Development, vol. 15, no. 1, pp. 17-30. OECD 2015, ‘Economic survey of Indonesia. Indonesia’ Retrieved from www.oecd.org/eco/surveys/economic-survey-indonesia.htm Quazi, R 2014, ‘Corruption and foreign direct investment in East Asia and South Asia: An economic study’, International Journal of Economics and Financial Issues, vol. 4, no. 2, pp. 231-242. Quere, B.A., Coupet, M. & Mayer, T 2007, ‘Institutional Determinants of Foreign Direct Investment’, The World Economy, vol. 30, no. 5, pp. 764-782 Ridzuan, A.R., Ismail, N.A., & Che Hamat, AF 2018, ‘Modeling Macroeconomic Determinants for Foreign Direct Investment Inflows in ASEAN-5 Countries’, International Journal of Economics and Management, vol. 12, no. 1, pp. 153-171. Shen, C., & Williamson, JB 2005, ‘Corruption, democracy, economic freedom and state strength’, International Journal of Comparative Sociology, vol. 46, no. 4, pp. 327-345. Swaleheen, M., & Stansel, D 2007, ‘Economic freedom, corruption, and economic growth’, Cato Journal, vol. 27, no. 3, pp. 343-358. Tanzi, V., & Davoodi, H., 1997. ‘Corruption, public investment and growth’. Paper presented at 53rd Congress of the International Institute of Public Finance, Kyoto, Japan. August 25-28 1997 Transparency International 1996, National integrity system: The TI source book. Berlin, Germany: Transparency International. Tullock, G 1996, ‘Corruption theory and practice’, Contemporary Economic Policy, vol. 14, no. 3, pp. 6–13. Udenze, O 2014, ‘The effect of corruption on foreign direct investments in developing countries’, The Park Place Economist, vol. 22, pp. 87–95. UNCTAD (2017), ASEAN Investment Report 2017: Foreign Direct Investment and Economic Zones in ASEAN, (ASEAN@50 Special Edition). Voyer, P., & Beamish, P 2004, ‘The effect of corruption on Japanese foreign direct investment’, Journal of Business Ethics, vol. 50, no. 3, pp. 211-224. Wheeler, D., & Mody, A 1992, ‘International investment location decisions: The case of US firms’, Journal of International Economics, vol. 33, pp. 57–76. Xaypanya, P., Rangkakulnuwat, P. & Paweenawat, SW 2015, ‘The determinants of foreign direct investment in ASEAN: The first differencing panel data analysis’, International Journal of Social Economics, vol. 42, no. 3, pp. 239-250. Zhao, J., Kim, S., & Du, J 2003, ‘The impact of corruption and transparency on foreign direct investment: An empirical analysis’, Management International Review, vol. 43, no. 1, pp. 41-62.
Uncontrolled Keywords: corruption; Foreign Direct Investment (FDI); ASEAN-5; static panel data, unimas, university, universiti, Borneo, Malaysia, Sarawak, Kuching, Samarahan, ipta, education, research, Universiti Malaysia Sarawak.
Subjects: H Social Sciences > HA Statistics
H Social Sciences > HB Economic Theory
H Social Sciences > HD Industries. Land use. Labor > HD61 Risk Management
Divisions: Academic Faculties, Institutes and Centres > Faculty of Economics and Business
Depositing User: Abdul Karim
Date Deposited: 22 Jan 2019 01:24
Last Modified: 17 Jun 2020 07:06
URI: http://ir.unimas.my/id/eprint/23116

Actions (For repository members only: login required)

View Item View Item