Sources of FDI Flows to Developing Asia: The Roles of Distance and Time Zones

This paper investigates sources and determinants of foreign direct investment (FDI) flows to developing Asia using bilateral FDI flows for the period 1990-2005. With regard to the determinants of FDI flows, the paper uses an augmented gravity model framework. The paper shows the differences in the determinants of FDI flows to developing Asian economies from Asian and Pacific region, compared to those from non-regional OECD economies, emphasizing the roles of distance and time zone differences. The paper shows that the elasticity of distance is greater for FDI from the non-Asia pacific OECD economies than intraregional Asian flows. However, this difference disappears when one accounts for difference in the time zones. Thus, differences in the time zones appear to act as a hindrance to FDI. [ADBI WP no.117]