Terms of Trade, Foreign Direct Investment, and Development: A Case of Intra-Asian “Kicking Away the ladder"?

December 1, 2013

This paper addresses in more detail the question raised in Wacker (2011b): why does foreign direct investment (FDI) generally have a positive impact on developing countries’ terms of trade except in the case of South Asia? The authors argue that South and East Asia have largely pursued different world market integration strategies that have been fostered by different types of FDI: While horizontally motivated FDI has helped East Asia achieve some market power in certain higher-value product niches, late-coming South Asian economies have successfully operated in global industries via price competitiveness, fueled by vertically motivated FDI.

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Topics: FOREIGN DIRECT INVESTMENT (FDI) REGIONALISM LEAST DEVELOPED COUNTRIES (LDCS)

Regions: ASIA-PACIFIC

Authors: KONSTANTIN M. WACKER PHILIPP GROßKURTH TABEA LAKEMANN

Publishing Institution: ASIAN DEVELOPMENT BANK

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