Foreign direct investment in Cambodia: Determinants and impact on domestic labour productivity and international trade

This dissertation is about foreign direct investment (FDI) and its impact on domestic labour productivity and international trade in Cambodia. It begins with detailed descriptions of inward FDI in terms of the Kingdom's economic and business environment, geographic origins, modes of entry, provincial and sectoral distributions, and FDI role in economic development as well as competitive advantages according to Porter's "diamond.";In assessing FDI determinants, pull and push factors are incorporated into the analysis. The results show that a number of home-country factors are significant determinants of FDI in Cambodia. FDI in Cambodia is positively determined by the relatively higher GDP growth rate of home countries and bilateral trade between Cambodia and home countries of FDI as well as the exchange rate. However, geographic distance, the 1997--98 Asian crisis, and China's WTO membership have been shown to be negatively associated with FDI inflows into Cambodia.;In terms of its effects, FDI has played an important role in the country's economic development, which is confirmed by the positive impact of FDI on domestic labour productivity and Cambodia's international trade. Yet, the impact of FDI on labour productivity in Cambodia is limited. Investment in physical capital has contributed to the improvements in labour productivity.;With regard to FDI impact on trade, it was found that FDI has stimulated both Cambodia's exports and imports, which in turn had a positive impact on FDI. This suggests that FDI and trade reinforce each other. Yet, there is no evidence showing that FDI has played a crucial role in improving the chronic external trade deficits of the country. FDI activities, however, are likely to absorb a vast pool of the unemployed as well as the bulk of the underemployed low-skilled labour force in the agriculture sector in rural Cambodia.