Japanese FDI Flows in Asia: Perspectives and Challenges PDF
Preview Japanese FDI Flows in Asia: Perspectives and Challenges
Japanese FDI Flows in Asia The book is dedicated to Dr. Johzen Takeuchi, Professor, School of Economics, Nagoya University, Japan – A greathuman, an eminent scholar, and my mentor – who initiated me in this area and has been instrumental for the completion of this study. Japanese FDI Flows in Asia Perspectives and Challenges Mohan L. Lakhera ©MohanL.Lakhera2008 Softcover reprint of the hardcover 1st edition 2008 978-0-230-20155-2 Allrightsreserved.Noreproduction,copyortransmissionofthis publicationmaybemadewithoutwrittenpermission. Noparagraphofthispublicationmaybereproduced,copiedortransmitted savewithwrittenpermissionorinaccordancewiththeprovisionsofthe Copyright,DesignsandPatentsAct1988,orunderthetermsofanylicence permittinglimitedcopyingissuedbytheCopyrightLicensingAgency,90 TottenhamCourtRoad,LondonW1T4LP. Anypersonwhodoesanyunauthorizedactinrelationtothispublication maybeliabletocriminalprosecutionandcivilclaimsfordamages. Theauthorhasassertedhisrighttobeidentifiedastheauthorofthiswork inaccordancewiththeCopyright,DesignsandPatentsAct1988. Firstpublished2008by PALGRAVEMACMILLAN Houndmills,Basingstoke,HampshireRG216XSand 175FifthAvenue,NewYork,N.Y.10010 Companiesandrepresentativesthroughouttheworld PALGRAVEMACMILLANistheglobalacademicimprintofthePalgrave MacmillandivisionofSt.Martin’sPress,LLCandofPalgraveMacmillanLtd. Macmillan®isaregisteredtrademarkintheUnitedStates, UnitedKingdomandothercountries.Palgraveisaregisteredtrademarkin theEuropeanUnionandothercountries. ISBN 978-1-349-29970-6 ISBN 978-0-230-22733-0 (eBook) DOI 10.1057/9780230227330 Thisbookisprintedonpapersuitableforrecyclingandmadefromfully managedandsustainedforestsources.Logging,pulpingandmanufacturing processesareexpectedtoconformtotheenvironmentalregulationsofthe countryoforigin. AcataloguerecordforthisbookisavailablefromtheBritishLibrary. LibraryofCongressCataloging-in-PublicationData Lakhera,MohanL.,1936 JapaneseFDIflowsinAsia:perspectivesandchallenges/MohanL. Lakhera. p.cm. Includesbibliographicalreferencesandindex. 1. Investments,Japanese Asia. 2. Investments,Foreign Asia. I. Title. HG5702.L352008 332.67’35205 dc22 2008015143 10 9 8 7 6 5 4 3 2 1 17 16 15 14 13 12 11 10 09 08 Contents ListofFigures vii ListofTables viii ListofAbbreviations xi Preface xii AbouttheBook xvi Acknowledgements xviii 1 Introduction 1 1.1 Theoverview 1 1.2 FDItheoriesandhypotheses:abrieftaxonomy 2 1.3 Motives 13 1.4 Thecurrentinternationaleconomicenvironment 15 1.5 JapaneseFDIflows 17 1.6 Thepresentstudy:contextandmotivation 22 1.7 Designandmethodology 25 2 JapaneseFDIOutflows 27 2.1 Introduction 27 2.2 DifferentwavesinJapaneseFDI 28 2.3 Developedanddevelopingcountries 33 2.4 JapaneseFDIflowsinAsia 43 2.5 Japaneseinvestmentinindustry 51 2.6 Asummaryprofile 59 3 JapaneseInvestors’PerceptionsofLocationAdvantages 63 3.1 Introduction 63 3.2 Methodology 65 3.3 Investors’perceptionofIndia,ChinaandEastAsia: motivesandpreferences 68 3.4 Constraints 70 3.5 CompaniesinvestingoutsidebutnotinIndia 86 3.6 Resultsofthelogitmodel 88 3.7 Concludingremarks 90 v vi Contents 4 JapaneseDomesticCompanies’Perceptionfor InvestmentAbroad 95 4.1 Introduction 95 4.2 Internalizationandinternationalizationprocessmodels 96 4.3 Principaldeterminantsofinternationalorientation 101 4.4 Modelresults 103 4.5 Japanesedomesticcompanies’perceptionfor internationalorientation 104 4.6 Concludingremarks 108 5 DeterminantsofJapaneseFDIFlows 111 5.1 Introduction 111 5.2 Maingoals 114 5.3 DeterminantsofFDIandliteraturesurvey 115 5.4 Themodel–constructionofvariablesandthe methodofestimation 127 5.5 Econometricresultsandinterpretation 129 5.6 Conclusions 137 5.7 Prospects 138 6 Conclusions 140 6.1 Themotivation 140 6.2 EmergingtrendsintheenvironmentforFDI 142 6.3 Results:investors’perceptions 146 6.4 Quantificationoftheratings 150 6.5 Econometricmodellingofthedeterminantsof JapaneseFDI 151 6.6 Perspectivesandchallenges 152 EndNotes 157 TechnicalAnnex 173 References 181 Index 197 List of Figures Figure2.1 JapaneseFDIoutflows 31 Figure2.2a JapaneseFDIflowsindevelopedanddeveloping countries 35 Figure2.2b Shareofdevelopedanddevelopingcountries 35 Figure2.3 FlowsofJapaneseFDIindifferentregions 41 Figure2.4 Sharesofthedifferentregions 42 Figure2.5 JapaneseFDIflowsinAsia 44 Figure2.6 JapaneseFDIflowsinNIEs 47 Figure2.7 JapaneseFDIflowsinASEAN-4 49 Figure2.8 JapaneseFDIflowsinChinaandIndia 51 Figure2.9 JapaneseFDIinindustry 52 Figure2.10 Shareofmanufacturingandnon-manufacturing investmentinthetotal 54 Figure2.11 JapaneseFDIinindustryinAsia 58 Figure2.12 JapaneseFDIinChinaandASEAN-4 62 Figure5.1 AverageJapaneseFDItoGDPratio 114 Figure5.2 AveragepercapitaGDP 117 Figure5.3 AveragepercapitaJapaneseFDI 117 Figure5.4 TradedensitywithJapan 120 Figure5.5 Averageratioofgrossdomesticcapitalformation toGDP 121 Figure5.6 Acomparativepictureofaveragemonthlywages 122 vii List of Tables Table1.1 Ownership,locationandinternalization(OLI) approach 9 Table1.2 DynamicsofJapaneseFDIflows 21 Table2.1 JapaneseFDIflows:global–wave-wise comparison 32 Table2.2 JapaneseFDIflowsindevelopedanddeveloping countries–aninter-periodcomparison 34 Table2.3 Region-wiseaverageannualflowsindifferent periods 38 Table2.4 JapaneseFDIoutflows–region-wise:levels, growthrates 39 Table2.5 JapaneseFDIoutflows–percentageshares oftheregions 40 Table2.6 JapaneseFDIinAsia–annualaverages 44 Table2.7 JapaneseFDIintheNIEs 46 Table2.8 JapaneseFDIinASEAN-4 48 Table2.9 JapaneseFDIinChinaandIndia–a contrastingpicture 50 Table2.10 JapaneseFDIoutflowsinindustry 53 Table2.11 JapaneseFDIinmanufacturingand non-manufacturing 55 Table2.12 JapaneseFDIintopsectors 56 Table2.13 Period-wisepercentageshareofJapanese investmentinindustryinAsia 59 Table2.14 AverageannualJapaneseFDIflowsin ChinaandASEAN-4 62 Table3.1 BusinesspreferenceforIndiavis-à-visChinaand EastAsia:over-allparametricvaluesofmeanand standarddeviation 70 Table3.2 Thepositionofphysicalinfrastructure 71 Table3.3 Ratingofinfrastructure:Indiacompared toNIEs,ASEAN-4andChina 73 Table3.4 Ratingofthepublicadministrationbyinvestors: IndiacomparedtoChinaandEastAsia 76 Table3.5 DegreeofadoptionofJMTinIndia, ChinaandEastAsia 80 viii ListofTables ix Table3.6 ImpedimentstotheadoptionofJMTinIndia, ChinaandEastAsiaasreportedbytheinvestors 82 Table3.7 AverageratingsofthecontrolsysteminIndia comparedtothecountriesofEastAsiaand China 84 Table3.8 Un-weightedandweightedmeansandS.D. relatingtotheperceivedbottlenecks 87 Table3.9 Correlationmatrix:businessenvironment variables 88 Table3.10 Mainresultsofthelogitmodel 89 Table4.1 Modelresults:dependentvariable–overseas salesratio(OSR) 103 Table4.2 ReasonsfornotinvestingoutsideJapan 104 Table4.3 Businessobjectivesfromthecountries 105 Table4.4a Perceptionofdomesticcompaniesfor investmentabroad 107 Table4.4b Indiavis-à-visChinaandEastAsia– meanandS.D.oftherating 107 Table5.1 Selectedeconomiccharacteristics–overall annualaverages 113 Table5.2 Determiningvariables 116 Table5.3 Averageratingsoftheeconomicincentives inthehostcountriesbyJapaneseinvestors investinginAsia 124 Table5.4 ParameterestimatesforJapaneseFDI flows:NIEs 130 Table5.5 ParameterestimatesforJapaneseFDIflows: NIEs+China 131 Table5.6 ParameterestimatesforJapaneseFDIflows: ASEAN-4 132 Table5.7 ParameterestimatesforJapaneseFDIflows: ASEAN-4+China 132 Table5.8 ParameterestimatesforJapaneseFDIflows: ASEAN-4+China+India 133 Table5.9a ParameterestimatesforJapaneseFDIflows: China+India 134 Table5.9b ParameterestimatesforJapaneseFDIflows: ChinaandIndiaseparately:OLS 134 Table5.10 ParameterestimatesforJapaneseFDIflows foralltencountries 135 Table5.11 Restrictedmodels:results 136 Table6.1 Measuresofcountryattractiveness:NIEs-4, ASEAN-4vis-à-visChina 153
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