Macroeconomic Synchronization and Foreign Direct Investment Inflow into ASEAN: Evidence from Malaysia’s Experiences

  •  Tajul Ariffin Masron    
  •  Rohana Kamaruddin    


ASEAN has experienced remarkable growth performance in the last decade, in particular the period before the 1997 economic crisis. This great achievement is partly attributed to the inflow of foreign direct investments (FDI) into the region. Today, ASEAN is facing stiff competition to attract FDI inflow with the emergence of China and India as new competitors or locations for (FDI). Meanwhile, the 1997 economic crisis has also resulted in large volatility especially exchange rate volatility. As part of the efforts to stabilize the region, there is a suggestion that ASEAN has to pursue regional currency. Regional currency, in turn, requires ASEAN macroeconomic to converge or synchronize to enable all members will be benefited from the formation. In the nutshell, it is the importance of this convergence that propels this study to undertake an investigation into the impact of several macroeconomic convergences on the FDI flow into ASEAN. As expected, this study found that macroeconomic synchronization, which is believed as able to strengthening the formation of ASEAN Free Trade Area (AFTA) if successfully coordinated, has a significant impact on the inflow of FDI into the region.

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