A COMPARISON OF FDI DETERMINANTS IN ASEAN3 AND ASEAN5: NEW APPROACH FROM FINANCIAL INTEGRATION FACTOR MEASURED BY KAOPEN INDEX

Abstract

This study investigates foreign direct investment (FDI) determinants in ASEAN3 and ASEAN5 and fills a gap in the existing literature by providing a comprehensive empirical comparison analysis. To resolve the research problem, the quantitative research strategy with the panel ordinary least square estimation is used by the method of first differencing. The empirical results show some interesting similarities and differences between the two countries groups. The coefficient of financial integration is positive and significant at 1% level of significance on FDI inflows in ASEAN3 and ASEAN5. The findings of this study found the hypothesis that foreign direct investment in ASEAN3 and ASEAN5 is positively correlated to market size, infrastructure facilities, and negatively correlated to labor cost as well as trade openness in ASEAN3.