Determining the influence of LPI, GCI and IR on FDI: A study on the Asia and Pacific Region

Abstract

This study examines the impact of the Logistics Performance Index (LPI), Global Competitiveness Index (GCI) and Interest Rates (IR) on Foreign Direct Investment (FDI) for the Asia & Pacific region. The study is original as extensive evidence on the impact of LPI, GCI and IR on FDI in the Asia & Pacific region are examined initially. For the years 2007, 2010, 2012, 2014, 2016 and 2018, data was gathered for 33 nations in the Asia and Pacific area. Data analysis was performed using a panel regression model and multiple linear regression. The findings of the study reveal that LPI, GCI and IR are the three major factors influencing FDI inflows into the economies. However, the impact of these factors varies from country to country. The results concluded that LPI positively impacts FDI in India, Korea, Lebanon, and Oman. In contrast, a negative influence was observed for China, Kuwait and the Philippines. GCI positively impacts FDI in China, Korea, Kuwait, Pakistan and the Philippines, while a negative impact was observed in Armenia, India, Lebanon. Furthermore, IR has a positive impact on FDI flows in China and Egypt while in Korea and Lebanon, a negative impact was observed. Therefore, policymakers should focus more on improving the infrastructural requirements and macroeconomic factors while considering the other country-level variables that influence the FDI in flow.