Impacts of the Republic of Korea foreign direct investment on the development of CLMV

Abstract

Foreign Direct Investment (FDI) brings the critical development in host countries’ infrastructures such as public utility, information technology and transportation systems. FDI also improves their people’s income and living standard. Because of above mentioned benefits, many countries have continuously put efforts to attract FDI. CLMV, consisting of Cambodia, Lao, Myanmar, and Vietnam, has struggled to attract FDI and due to their plentiful natural resources, lower manufacturing cost, and market opportunity, they have attracted FDI from many countries. Korean FDI in CLMV is increasing and has been recently ranked top. This study has objectives to determine the factors of the growth in gross domestic products by means of linear regression and analyze causality between the growth of Korean FDI and other factors by means of Granger Causality test, using panel data (comprised of time series data and cross sectional data). The results showed that the growth of Korean FDI significantly boosted the growth of Vietnam’s GDP. The granger causality test affirmed that the growth of Korean FDI to CLMV affects their GDP growth only in the first year. Finally, this study affirms the effectiveness of Korean FDI in CLMV.