Prudent Macro Management of the Economy and Inward FDI in ASEAN Member States

The current research work considers the effect of prudent macroeconomic management of the host economy on inward foreign direct investment in Association of South East Asian Nations member states. This research use annual data of nine ASEAN countries namely: Brunei, Cambodia, Indonesia, Laos, Malaysia, Philippines, Singapore, Thailand and Vietnam for twenty years from 1991 to 2010. The results obtained with random effect panel estimation technique manifests the importance of judicious management of the economy. Steady but relatively slow and predictable decline of the host currency exchange rate have a positive significant effect. However, contrary to expectations inflation though have a negative sway still the effect is insignificant. The conventional FDI location drivers such as market size, development level, and provision of human capital proxied by tertiary education also exert a significant positive sway. Contrary to theoretic wisdom extent of economic liberalisation and primary or secondary education had the expected coefficient but failed to reach the needed significance level.