JAPANESE FOREIGN DIRECT INVESTMENT IN EAST ASIA
This research examines the patterns of direct foreign investment (DFI) by Japan in the economies of East Asian countries, and the opportunities for future DFI in these economies. The findings of this research are presented in the following discussions: (1) an overview of Japanese DFI; (2) economic growth in East Asia; (3) Japanese DFI policy; (4) Japanese resource demand, DFI and opportunities for future DFI in resource industries in other East Asian economies; (5) Japanese manufacturing efficiency requirements, DFI and opportunities for future DFI in manufacturing industries in other East Asian economies; and (6) Japanese DFI and opportunities for future DFI in selected East Asian economies.
Japan's DFI in 1994 (latest year for which official data were available at the time this research was performed) totaled US$17.7 billion (Special, 1995, p. 12). This level of DFI represented as 29 percent increase over 1993 levels. Japanese DFI had dropped 20 percent in 1993 from 1992, but had increased by 43 percent in 1992 over 1991 levels.
There is a direct correlation between DFI and the growth of international trade (Geist, 1995, p. 676). "This phenomenon is generally attributed to the fact that as much as fifty percent of international trade occurs between affiliated companies, referred to as intrafirm trade" (Lawrence, 1991, p. 14). In addition to its effect on trade, DFI provides the host state with numerous other benefits. These include the introduction of new technologies, management skills, capital, and the creation of new jobs. Further, the presence of an internationally competitive manufacturer or service provider can often raise the overall performance of competing firms within a domestic market.
Many states, recognizing the benefits discussed above, have in recent years made a concerted effort to attract DFI by establishing lucrative investment incentive programs (Ge...