The determinants of FDI inflows by industry to ASEAN (Indonesia, Malaysia, Philippines, Thailand, and Vietnam)

Foreign direct investment (FDI) has become more important for the economic growth and development of many countries. FDI can deliver capital, a means to pursue global strategic objectives, and a means to access technology and skills to the host country. Attracting FDI is an important issue of concern to many developing nations. The first objective of this study employs the Gravity Model to explore the determinants of FDI by industry in five ASEAN countries (Indonesia, Malaysia, Philippines, Thailand, and Vietnam). The second objective of this study is to analyze the volatility of FDI from three major home sources (the EU, Japan, and the US) to these five host countries to explore the relationship between FDI volatility and an industry's size of FDI.;The empirical results show that GDP of the host and home countries, GDP per capita of the host and home countries, industry imports from home country, industry exports to home country, industry tariff rates, and industry output levels all have a positive effect on FDI. Distance, wage and education have a negative effect on FDI. Population variables of the host and home countries have positive impacts on FDI when GDP per capita variables are constant.;Regarding FDI volatility, the study finds different relations due to the size of FDI in an industry and the volatility of FDI among the three cases. For the EU and Japan, FDI volatility will first increase, and then decrease, according to the size of FDI. In the case of the US with a larger FDI size, volatility will go up, then down, and then go up again.