FDI Inflows and Poverty Reduction in Asia : Comparative Analysis for the ASEAN and SAARC Economies

The aim of this paper is to reinvestigate the impact of foreign direct investment (FDI) inflows on welfare or poverty reduction in Asia. We used FDI net inflows per capita and the United Nations Development Program's Human Development Index (HDI) as the principal variables. Our analyses confirm the positive and strongly significant relationship between FDI net inflows and poverty reduction in Asia, but indicate significant differences between South Asia and Southeast Asia. Generally, we find that FDI has a greater impact on welfare in SAARC countries than in ASEAN countries. Our results hold true for both HDI and real GDP, and are shown to be robust using both panel and pool model specifications