ASEAN and FTAA: External Threats and Internal Institutional Weaknesses

Huang Yasheng, Randall Morck and Yeung Bernard
Additional contact information
Huang Yasheng: Sloan School of Business, MIT
Yeung Bernard: New York University

Business and Politics, 2004, vol. 6, issue 1, 1-45

Abstract: ASEAN countries perceive the possible formation of the FTAA as a potential threat on the grounds that it may divert export markets and foreign direct investment (FDI) capital to the FTAA region. This effect, together with the "China factor" and the hangover from the 1997 financial crisis, posts a concern to the ASEAN countries' economic growth. We show that, with Singapore as an exception, ASEAN countries are afflicted with state activism, poor property rights protection, and under-developed corporate governance. We argue that a poor institutional environment may exacerbate the effects of an external shock - such as that of FTAA - and thus we need to explicitly incorporate the role of institutional environments in our analysis. We further argue that while FDI flows to locations with market opportunities, a location's institutional environment affects the composition of FDI. Due to ASEAN countries' institutional weakness, its substantial inward FDI has mainly substituted, rather than complemented, local entrepreneurship. As FTAA may divert FDI flows into ASEAN countries, their appropriate response is to improve institutional quality so that the share of the more productive complementary FDI will increase in the total FDI inflows.

Date: 2004
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://doi.org/10.2202/1469-3569.1084 (text/html)
For access to full text, subscription to the journal or payment for the individual article is required.

Related works:
Journal Article: ASEAN and FTAA: External Threats and Internal Institutional Weaknesses (2004)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bpj:buspol:v:6:y:2004:i:1:n:4

Ordering information: This journal article can be ordered from
https://www.cambridg ... usiness-and-politics

DOI: 10.2202/1469-3569.1084

Access Statistics for this article

Business and Politics is currently edited by Vinod K. Aggarwal

More articles in Business and Politics from De Gruyter
Bibliographic data for series maintained by Peter Golla ().