Intra-Regional FDI and Economic Integration in South Asia: Trends, Patterns and Prospects

Prema-chandra Athukorala

Departmental Working Papers from The Australian National University, Arndt-Corden Department of Economics

Abstract: This paper examines trends and patterns of intra-regional FDI in South Asia, with a focus on the potential for integrating production processes among countries in the region through further trade and investment policy reforms. The empirical evidence pieced together from scattered sources suggests that horizontal (market seeking) FDI has continued to dominate South Asian intra-regional FDI, with a significant shift in recent years in favour of services sector activities. Vertical (efficiency seeking) FDI in the region has remained confined to a few product lines, predominately garments, and also a few industries in which the availability of specific natural resources plays an important role in the site selection decisions of firms. In other industries, including electronics and electrical goods in which global production sharing is heavily concentrated, there is no evidence of notable cross-border operations by regional firms. The limited achievement so far in fostering cross-border production sharing through vertical FDI has been the outcome of unilateral, rather than region-wide, trade and investment policy reforms.

Keywords: South Asia; foreign direct investment; production networks; free trade agreements (FTAs) (search for similar items in EconPapers)
JEL-codes: F15 F23 O53 (search for similar items in EconPapers)
Pages: 40 pages
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:pas:papers:2013-05

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