The european union’s foreign direct investment into indonesia: Determinants and threats

For many developing economies, foreign direct investment (FDI) has been the oil that fired the engine of economic development. Typical examples include Malaysia, Singapore, Taiwan and South Korea. For countries that entered the FDI arena in the 1970s, the early-mover advantage provided them with the necessary flow of investment. Having access to cheap labour and natural resources made these economies a haven for MNCs from developed economies. Over time, however, a greater number of players have entered this FDI tournament. The late-comers, such as Vietnam, China, the Central and East European (CEE) countries as well as several Latin American nations, are now able to compete with the early-movers and in some cases are winning the tournament. At the same time, the proportion of FDI flowing to developing countries has decreased markedly in recent years (UNCTAD, 2002). South-East Asia has been particularly hit as FDI declined from USD 27.7 billion in 1997 to USD 10.7 billion in 2001. This dramatic decline has made the tournament among these countries more intense.