Multinational Enterprises in Asian Development Other books by the author Saving, Investment and Growth in India [with Kunal Sen] (2003) Crisis and Recovery in Malaysia: The Role of Capital Controls (2003) Growth, Employment and Migration in Mainland Southeast Asia: Structural Change in the Greater Mekong Economies [with Chris Manning and Piyasiri Wickramasekara] (2000) Liberalization and Industrial Transformation: Sri Lanka in International Perspective [with Sarath Rajapatirana] (2000) Structural Change and International Migration in East Asia: Adjusting to Labour Scarcity [with Chris Manning] (1999) Trade Policy Issues in Asian Development (1998) Macroeconomic Policies, Crises and Growth in Sri Lanka, 1969–1990 [with Sisira Jayasuriya] (1994) Export Instability and Growth: Problems and Prospects for Developing Countries [with Frank Huynh] (1987) Mudal Saha Mulya Ayathana [Money and Monetary Institutions] (2nd edition, 1986) Edited volumes The Economic Development of South Asia (3-volume reference collection) (2001) Developing Countries in the World Trading System [with Ramesh Adhikari] (2001) Multinational Enterprises in Asian Development Prema-chandra Athukorala, Professor of Economics, Research School of Pacific and Asian Studies, Australian National University, Australia Edward Elgar Cheltenham, UK • Northampton, MA, USA © Prema-chandra Athukorala, 2007 All rights reserved No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical or photocopying, recording, or otherwise without the prior permission of the publisher Published by Edward Elgar Publishing Limited Glensanda House Montpellier Parade Cheltenham Glos GL50 1UA UK Edward Elgar Publishing, Inc William Pratt House Dewey Court Northampton Massachusetts 01060 USA A catalogue record for this book is available from the British Library Library of Congress Cataloguing in Publication Data Athukorala, Prema-chandra Multinational enterprises in Asian development / Prema-chandra Athukorala p cm Includes bibliographical references and index International business enterprises—Asia Asia—Economic policy I Title HD2891.85.A86 2007 338.8Ј885—dc22 2006023098 ISBN: 978 84720 102 Printed and bound in Great Britain by MPG Books Ltd, Bodmin, Cornwall For my great mentor, Max Corden Contents List of figures List of tables Preface ix x xiii Multinational enterprises and developing countries: background and preview The role of MNEs in economic development: changing perceptions Scope and preview Foreign direct investment in developing Asia: trends, patterns and prospects Policy context Trends The ‘China fear’ Industry profile Prospects: a summing up Multinational enterprises and manufacturing for export: emerging patterns and opportunities for latecomers MNEs and manufacturing for exports: a typology Evidence Concluding remarks Appendix 3.1: Data sources on MNE share in manufactured exports Product fragmentation and trade patterns in East Asia Data Trends and patterns of product fragmentation Product fragmentation and trade patterns Conclusion and inferences Multinational firms in crisis and recovery: lessons from the 1997–98 Asian crisis Analytical context Capital flows during the crisis Role of MNE affiliates in adjustment and recovery Concluding remarks vii 12 13 26 35 39 41 45 47 54 67 70 72 74 75 84 97 100 101 102 112 119 viii 10 Multinational enterprises in Asian development Capital inflows and the real exchange rate: foreign direct investment versus short-term capital Trends and patterns of capital inflow Real exchange rate–capital flow nexus: a first look Real exchange rate–capital flow nexus: empirical analysis Conclusion Appendix 6.1: The Australian model Appendix 6.2: Measurement of the real exchange rate Trade orientation and productivity gains from international production Analytical framework Data Productivity patterns Determinants of productivity Conclusion and policy inferences Appendix 7.1: Measurement of total factor productivity growth Multinational enterprises and the globalization of R&D: a study of US-based firms Theoretical framework Trends and patterns of R&D internationalization Determinants of R&D intensity Conclusion Appendix 8.1: Country coverage, variable definition and data sources and supplementary regression results Multinational firms and factor proportions in manufacturing: does parentage matter? Foreign direct investment in Sri Lankan manufacturing Methodology and data Results Conclusion Foreign direct investment in economic transition: the experience of Vietnam Investment climate Trends and patterns of FDI Economic impact Conclusions and policy inferences Appendix 10.1: Export processing zones in Vietnam References Index 121 124 128 133 140 143 145 147 149 153 156 156 161 166 168 169 171 180 191 194 198 200 208 211 217 219 220 225 234 246 248 250 273 Figures 2.1 FDI inflows to developing countries and developing Asia, 1980–2004 3.1 Share of MNE affiliates and world market share in manufactured exports in selected Asian countries 4.1 World trade in parts and components, 1992–2003 4.2 Parts and components exports by major country groups, 1992–2003 5.1 Net capital flows to Indonesia, Korea, Malaysia, the Philippines and Thailand, 1996q1–2002q1 6.1 Net private capital flows to Asia and Latin America 6.2 Net capital inflows and the real exchange rate for selected Asian and Latin 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(ed.), Foreign Direct Investment, Chicago: University of Chicago Press, pp 197–230 Yusuf, Shahid (2003), Innovative East Asia: The Future of Growth, New York: Oxford University Press Zejan, M.C (1990), ‘R&D activities in affiliates of Swedish multinational enterprises’, Scandinavian Journal of Economics, 92 (3), 487–500 Index affiliates of MNEs 47, 64, 79, 102 in China 69 East Asian crisis, role in recovery FDI as percentage of GDI 112, 113 Japanese affiliates 115–16 Malaysian manufacturing 116, 117–18, 119 US affiliates, employment 115 US affiliates, exports 114 in high-tech industries 53 in India 64 in Indonesian manufacturing 116 manufacturing exports share 55–6, 57–61 R&D activities 192 see also multinational enterprises AFTA (ASEAN Free Trade Area) 88 components trade 77, 80–84 agro-based processed food 50 annual export growth 54, 55–6 Argentina 125, 130 see also Latin America ASEAN countries components trade 93 exports to china 37 FDI industries 39 FDI inflows 33–4 foreign investment regime 16–20 ASEAN Free Trade Area (AFTA) 88 components trade 77, 80–84 Asian financial crisis 14, 17, 19, 229 capital flows 102–12 Asian crisis countries 104–5 mergers and acquisitions 109 net capital flows in Asian countries 106–8 net capital flows percentage change 109 US direct investment 110, 111 crisis management policy 14, 17 FDI, effect on 33–4 recovery, role of affiliates FDI as percentage of GDI 112, 113 Japanese affiliates 115–16 Malaysian manufacturing 116, 117–18, 119 US affiliates, employment 115 US affiliates, exports 114 assembly activities 51, 52–3, 58–60, 78, 163 Association of South East Asian Nations see ASEAN countries Australian model of a small economy 121, 143–5 automation of production processes 52 Balasubramanyam, V.N 148 Bangladesh FDI industries 41 foreign investment regime 24 bank lending 103, 108, 119, 122, 126, 127–8 banking 39 Bhagwati, Jagdish 147, 164 Blalock, Garrick 116 Brecher, Richard A 147 business licensing 13 Cambodia Chinese investment 39 FDI industries 40 FDI inflows 33 foreign investment regime 19 Canada 178 capital controls, Malaysia 18 capital inflow–real exchange rate, comparative analysis 123–41 capital flow–real exchange nexus 128–33 capital inflows, trends and patterns 124–8 conclusion 140–41 empirical analysis 133–40 273 274 Multinational enterprises in Asian development capital inflows 121–3, 143–4 capital intensity in Sri Lankan manufacturing, analysis 198–217 data 210–11 foreign direct investment 200–208 methodology 208–11 results 211–17 cascading tariff structures 49 Caves, R.E 68 centrifugal factors of R&D location decision 169–70 centripetal factors of R&D location decision 169, 172 chemical industries 49 China 59 components trade 77, 78, 84, 97 Cultural Revolution 63 FDI industries 40 FDI inflows 32–3, 35–7 final assembly 68 foreign investment regime 20–21 and India, comparison 64 manufactured exports 64 MNE affiliates 58, 69 as overseas investor 37, 39, 42 pre-revolution industrialization 50 trade restrictions by EU and USA 39 ‘China fear’ 35–9 clothing industry see garments industrycommunication innovations 51–2, 53 components trade (parts and components) 77–9, 84, 93 assembly 40, 51, 52, 58–60 cross-border 79, 93 developed countries 77 developing East Asia and ASEAN 77–9, 93 exports and imports, percentage 85–7 exports by major country groups 78 high-tech industries 37 intra-regional trade 93 in manufacturing trade 81–3 production 51, 59, 63–4 regional manufacturing trade flows 94, 95 regional patterns 89–92 two-way trade 79 UN trade database 74–5 world trade 52, 75–7, 78–9 consumer durables production 62 Corden, W.M 121 country reputation 67 country risk 61–2 crisis management packages 102 cross-border components trade 79, 93 cross-border mergers and acquisitions (M&As) 14, 102, 108, 112, 223 cross-border production activities 41, 53 Cultural Revolution, China 63 currency collapse 102 currency crises 120, 141 DCMNEs (developed countries multinational enterprises) 198–9, 217 developed countries components trade 77 multinational enterprises (DCMNEs) 198–9, 217 R&D locations of US MNEs 173, 178 Diaz-Alejandro, Carlos F 147 direct performance indicators 2, 12 Doingbusiness database 223–4 domestic credit contraction 102 domestic demand 62 domestic-market-oriented production 17, 39 domestic technological competency 181–2 domestic wages 53, 59 double counting of trade flows 97 East Asia average manufacturing wage 79, 80 components trade 77, 78, 80, 84 East Asia, newly industrialized countries (NIEs) 53, 54, 67 East Asian financial crisis 14, 17, 19, 229 capital flows 102–12 Asian crisis countries 104–5 mergers and acquisitions 109 net capital flows in Asian countries 106–8 Index net capital flows percentage change 109 US direct investment 110, 111 crisis management policy 14, 17 FDI, effect on 33–4 recovery, role of affiliates FDI as percentage of GDI 112, 113 Japanese affiliates 115–16 Malaysian manufacturing 116, 117–18, 119 US affiliates, employment 115 US affiliates, exports 114 Eastern Europe, liberalization reforms 36 economic adjustment in small open economy 143–4 Economic Freedom Index 223, 225 economic integration of Europe 79 efficiency-seeking investment 42, 47, 49 efficiency-seeking production 39–40 electronics industry 37, 39, 40, 51, 53 assembly activities 163 components trade 84 location decisions 62, 63, 206 revolution in Singapore 63 entrepot trade, Hong Kong 13, 50, 99 entrepreneurial talents 50 EOFDI see export-oriented foreign direct investment EPZs see export processing zones equity capital 26, 103 ethnic conflict, Sri Lanka 201, 202, 206 European multinational enterprises 52–3 European Union (EU) components trade 78 final goods exports 95 intra-regional trade shares 95 trade restrictions on China 39 exchange rate depreciation 102 see also real exchange rate export expansion 49–50, 52, 54, 55–6 role of MNEs 62–7 export incentives 48–9 export-led industrialization 49–50, 67 export of manufactured goods, analysis commodity composition 57–62 275 conclusion 67–8 data sources 70–71 evidence of participation 54–62 export expansion, role in 62–7 typology 47–53 export-oriented affiliates 115–16 export-oriented economies 17, 21, 147 see also import-substitution export-oriented foreign direct investment (EOFDI) 18, 45, 49, 60, 67, 202 China 21 India 22 Sri Lanka 24–5 export-oriented investors 47, 64 export-oriented production 39–40, 41, 49 export performance 54, 55–6 export processing zones (EPZs) 19, 20, 24, 221 Sri Lanka 200, 201, 218 Taiwan 15 Vietnam 248–9 export-promotion (EP) regime, China 21 export success of latecomers 64 exports by US MNE affiliates 114 external economic shocks 141 extra-regional trade 88, 93, 97 FDI see foreign direct investment FIEs see foreign-invested enterprises (FIEs) final assembly 52, 58–60, 68, 97 final goods exports 94–5 final trade 73, 78, 97 financial crisis 101–2 financial crisis, East Asia 14, 17, 19, 229 capital flows 102–12 Asian crisis countries 104–5 mergers and acquisitions 109 net capital flows in Asian countries 106–8 net capital flows percentage change 109 US direct investment 110, 111 crisis management policy 14, 17 FDI, effect on 33–4 276 Multinational enterprises in Asian development recovery, role of affiliates FDI as percentage of GDI 112, 113 Japanese affiliates 115–16 Malaysian manufacturing 116, 117–18, 119 US affiliates, employment 115 US affiliates, exports 114 financial services 39 Findlay, Ronald 147 Finland MNE affiliates 178 fiscal contraction 134, 139, 141 for export dynamism 80 foreign direct investment (FDI) 11, 13, 103, 122–3, 126 data limitations 26, 36 definition 26 domestic-market-oriented activities 202 in economic transition, Vietnam case study business environment 223–5 conclusions and policy inferences 246–7 FDI impact 234–46 FDI policy 220–23 FDI trends and patterns 225–34 indicators of ease of doing business 226–7 industry composition 231, 233–4 ownership structure 230 productivity growth 243–6 source country composition 231, 232 spatial distribution 234, 235 global contraction 34 global investment patterns 35–6 inflows 101, 107–10, 122 inflows, comparative data (19802004) 26–34 developing Asian countries in global context 27–9 developing countries and developing Asia 32 as percentage of gross domestic fixed capital formation 30–31 liberalization 39, 45 foreign-invested enterprises (FIEs) 40, 202 Vietnam 235–46 foreign investment regimes 13–26 ASEAN countries 16–20 Bangladesh 24 Cambodia 19 China 20–21 Hong Kong 13 India 21–3, 64 Indonesia 16, 17–18 Korea 13–15 Lao PDR 19–20 Malaysia 16, 17, 18, 110 Myanmar 20 Nepal 25 Pakistan 23 Philippines 16, 17, 18 South Asia 21–6 Sri Lanka 21, 24–5 Taiwan 15–16 Thailand 16 Vietnam 18–19, 220–23 foreign ownership 17 India 22 in Korea 14, 15 of land 14, 15 of land and real estate properties 15 Malaysia 18 fragmentation-based specialization 97, 98 fragmentation trade 53, 73, 98 see also product fragmentation free trade agreements (FTAs) 97, 98 free trade zones (FTZs) 22 Fukao, Kyoji 115 garments industry 39, 40, 67, 206, 217 Germany R&D activities of US MNEs 178 R&D expenditure 172 Gertler, Paul J 116 global assembly operations 52 global components trade 52, 75–7 global foreign direct investment flows 34 global industrial networks 41, 119 global innovatory centres 170 global investment patterns 35–6 Goh, Keng Swee 63 government expenditure 134, 139 growth dynamism 88, 97, 98 Index Harris Corporation 62, 206 Harvard Multinational Enterprise Project 164 headquarter R&D operations 169, 171 herd mentality 62, 206 high-tech industries 37, 41, 52, 53, 59 high-wage countries 78 Ho Chi Minh City 40 Hong Kong 50, 53, 63, 64 components trade 78 entrepot trade 13, 50, 99 foreign investment regime 13 investment in China 35 IMF (International Monetary Fund) 17 data sources 120, 136 import-substitution 13, 17, 40, 46 Bangladesh 24 economic failure of 147 growth strategy 50 industrialization strategy 21 Nepal 25 Sri Lanka 24 see also export-oriented economies independent R&D 170 Index of Economic Freedom 223, 225 India and China comparison 64 FDI industries 40–41 FDI inflows 34 FDI, potential for 42–3 foreign investment regime 21–3, 64 liberalization reforms 64 MNE affiliates 64 Indonesia 62, 63 capital flows 103, 105, 106 FDI, efficiency-seeking 40 FDI inflows 33, 34, 109 foreign investment regime 16, 17–18 mergers and acquisitions 108 MNEs affiliates 116 industry distribution of R&D expenditure 173, 174 industry profile in developing Asia 39–41 innovatory centres 178 innovatory process 169 Inspector Raj 23 intangible assets 101 277 Intel Corporation 37, 247 intellectual property rights 22 inter-company debt 103 inter-country wage differentials 79, 80, 97 international division of labour 51 International Monetary Fund (IMF) 17 data sources 120, 136 international product fragmentation 51–2, 72, 79, 80, 95, 98 trade patterns 84–97 direction of components trade 89–92 share of components in manufacturing trade flows 94, 95 total manufacturing, components and final trade 96 trends and patterns 75–84 components export by categories 85–7 components exports by country groups 78 components in manufacturing trade 79–80, 81–3 developed world components trade 77 East Asia 77, 78–9 manufacturing wage, East Asia 79, 80 NAFTA components trade 79 world components trade 75–7 international production, productivity growth analytical framework 149–53 conclusion and policy inferences 161–3 correlation matrix 160 data 153–5 productivity determinants 156–61 productivity growth determinants, regression results 159, 162 productivity patterns 156 productivity and related indicators 157–8 total factor productivity growth measurement 166–7 international specialization 122 internationalization of R&D 172–3 278 Multinational enterprises in Asian development Internet 53 intra-company loans 26 intra-regional FDI inflows 110 intra-regional import flows 88 intra-regional trade 41, 88 components 93, 94, 95 final manufacturing 93–5 in global network 53 in manufacturing in East Asia 93 patterns 84–97 product-sharing system 79 specialization 79 total manufacturing, components, and final trade 96 investment inflows, China 32–3 Ireland, as R&D location 178 Israel, as R&D location 178 Japan 88 affiliates in crisis-hit countries 115–16 car producers 72 components trade 77, 78 FDI inflows to crisis-hit countries 112 final good exports 95 fragmentation trade 88 multinational enterprises 52–3 overseas assembly activities 78 US affiliates, R&D intensity 178 Japanese occupation 50 Joint Venture Law (1979), China 20 joint ventures 14, 15, 21, 23, 221, 230 Kaohsiung, Taiwan 15 Katunayake Export Processing Zone (KEPZ) 62, 218 Khmer Rouge 19 knowledge-seeking investment 178 knowledge-seeking (overseas) R&D 170–71 knowledge spillover 170 Korea 50, 84, 93, 110 capital flows 103, 105–6 export expansion 62–3 FDI flows 34, 108–9 FDI industries 39 Five Year Plan (1962) 14 Foreign Investment Promotion act 14, 15 foreign investment regime 13–15 mergers and acquisitions 14, 15, 108 labour intensity 117 labour-intensive production 40, 52, 67 assembly locations 63 exports 41, 50–51 final consumables 49, 50 manufacturing 202 labour productivity growth 247 ladder effect in international specialization 122 Lao PDR FDI industries 40 FDI inflows 33 foreign investment regime 19–20 latecomers to manufacturing for export 50, 53 share of exports 64, 67, 68 Latin America capital inflow–real exchange rate, comparative analysis 123–41 capital flow–real exchange rate nexus 128–33 capital inflow, trends and patterns 124–8 conclusion 140–41 empirical analysis 133–40 debt crisis 119 foreign direct investment 69 R&D activities of US MNEs 173 liberalization reforms 163 Eastern Europe 36 India 64 Sri Lanka 200–202 Taiwan 15 Licence Raj 23 life-cycle investors 47 light manufacturing export sector 13 liquidity insurance 116 location decisions 47 assembly activities 79 electronics firms 62, 63, 206 final assembly 52 R&D 169–71, 181 low-wage countries 78 M&As see mergers and acquisitions Malaysia 58, 59, 63, 80, 93 capital flows 103, 106, 107 Index FDI flows 33, 34, 109–10 FDI industries 40 foreign investment regime 16, 17, 18, 110 high-tech industries 37, 40, 41 mergers and acquisitions 108 MNE manufacturing, post-crisis 116, 117–18, 119 manufacturing for export, analysis commodity composition 57–62 conclusion 67–8 data sources 70–71 evidence of participation 54–62 export expansion, role in 62–7 typology 47–53 manufacturing wages 79, 80 market-seeking investment 42, 47 mergers and acquisitions by foreign firms in Asian crisis 109 mergers and acquisitions (M&As) of domestic financial institutions, Korea 15 Mexico 79 financial crisis 119, 125 see also Latin America MFA (Multi-Fibre Arrangement) 51, 202 middle products see components trade MNEs see multinational enterprises Motorola 62, 206 Multi-Fibre Arrangement (MFA) 51, 202 multinational enterprise affiliates 47, 64, 79, 102 in China 69 East Asian crisis, role in recovery FDI as percentage of GDI 112, 113 Japanese affiliates 115–16 Malaysian manufacturing 116, 117–18, 119 US affiliates, employment 115 US affiliates, exports 114 in high-tech industries 53 in India 64 in Indonesian manufacturing 116 manufacturing exports share 55–6, 57–61 R&D activities 192 see also multinational enterprises 279 multinational enterprise subsidiaries see multinational enterprise affiliates multinational enterprises 1–3, 6–10 economic development, role in 3–6 see also multinational enterprise affiliates Myanmar 20 National Semiconductors 63 nationalization 23, 24 Nayyar, D 54 negative list of investment approval 17 Nepal, foreign investment regime 25–6 NIEs (newly industrialized economies) 53, 54, 67 nominal exchange rate 121 nominal exchange rate adjustment 134, 135, 140, 141 non-sterilized intervention 134 non-tradability/tradability 141 non-tradables/tradables 121, 143–4 North American Free Trade Agreement (NAFTA) 36, 80, 88 components trade 79 intra-regional trade shares 95 obsolescence 52 offshore assembly 52 oil price increases 124 openness to trade 135–6 ‘other’ capital flows 139 outsourcing 51, 52–3 see also product fragmentation overseas R&D operations 171 expenditure 172–3 ownership restrictions 17 Pakistan, foreign investment regime 23 parts and components see components trade performance indicators Philippines 58, 63, 80, 93 capital flows 103, 106, 107 components trade 78–9 FDI industries 40 FDI inflows 33–4 foreign investment regime 16, 17, 18 mergers and acquisitions 108 280 Multinational enterprises in Asian development pioneer status 16, 17 policy reforms in response to crisis 120 political instability 61 portfolio investment 103, 108, 119, 122, 126, 127–8 present-day transition economies 50 private capital flows 103 private foreign investment (PFI) see foreign direct investment process patents 22 product adaptation 170, 180–81 product composition (of MNE-related exports) 57–62 product fragmentation 51–2, 72, 79, 80, 95, 98 trade patterns 84–97 direction of components trade 89–92 share of components in manufacturing trade flows 94, 95 total manufacturing, components and final trade 96 trends and patterns 75–84 components export by categories 85–7 components exports by country groups 78 components in manufacturing trade 79–80, 81–3 developed world components trade 77 East Asia 77, 78–9 manufacturing wage, East Asia 79, 80 NAFTA components trade 79 world components trade 75–7 product patents 22 production technology, advances in 51 productivity gains from international production analytical framework 149–53 conclusion and policy inferences 161–3 correlation matrix 160 data 153–5 productivity determinants 156–61 productivity growth determinants, regression results 159, 162 productivity patterns 156 productivity and related indicators 157–8 total factor productivity growth measurement 166–7 property rights 49 quantitative import restrictions (QRs) 51 real exchange rate 66–7, 121–2, 143–4 measurement of 145–6 real exchange rate–capital inflow, comparative analysis 123–41 capital flow–real exchange nexus 128–33 capital inflows, trends and patterns 124–8 conclusion 140–41 empirical analysis 133–40 real exchange rate problem 121, 139, 140 regional division of labour 53 regional integration in East Asia 88 regional production-sharing networks 79 regional trading agreements (RTAs) 49 reinvested earnings 26, 36–7, 103, 110, 120 renovation (doi moi) reforms, Vietnam 18–19 Republic of Korea see Korea RER see real exchange rate research and development (R&D) as headquarter function 169, 171 location decisions 169–71 research and development (R&D) globalization, US firms data 185, 195–6 expenditure 173, 174–7, 179–80 model 180–85 R&D intensity determinants 180–91 domestic technological competency 181–2 investment environment 182 other variables 182–5 product adaptation 180–81 regression results 186–91, 197 theoretical framework 169–71 trends and patterns 171–80 resource-based manufacturing 49–50 Index resource-based processing activities 62 resource-rich developing countries 49 retained earnings 26, 36–7, 103, 110, 120 round-tripping capital 35 RTAs see regional trading agreements rules of origin (ROOs) 98 Sachs, Jeffrey 136, 142 seafood 50 second-tier exporting countries 58, 63 semiconductors 63, 84 services sector 39, 41 SEZ see special economic zones short-term capital flows 123–4 Singapore 63, 80, 93 assembly activities 58 components trade 78–9 efficiency-seeking production 39 entrepreneurial background 50 FDI industries 39–40 FDI inflows 33 foreign investment regime 16 high-tech industries 39, 41, 53, 59, 63 site selection 47 assembly activities 79 electronics firms 62, 63, 206 final assembly 52 R&D 169–71, 181 slicing the value chain see product fragmentation small open economy, economic adjustment 143–4 software industry 41, 42–3, 44, 74 South Korea 63, 64, 126, 202 see also Korea special economic zones (SEZs) 19, 20–21 spillovers 2–3 Sri Lanka 21, 60–62 capital intensity in manufacturing, analysis 198–217 data 210–11 FDI 200–208 methodology 208–11 results 211–17 ethnic conflict 201, 202, 206 export processing zones (EPZs) 200, 201, 218 281 export trade 205–8 FDI industries 41 FDI inflows 201–2 foreign investment enterprises (FIEs) 202 foreign investment regime 21, 24–5 liberalization reforms 200–202 standard fragments 68 standardization of components 53, 68 standardized products 51 sterilized intervention 134–5, 140, 141 subsidiary firms see multinational enterprise affiliates Sweden multinational enterprise affiliates 178 R&D expenditure 172 Taiwan 50, 53, 63, 64, 93 components in total manufacturing exports 84 export expansion 62 export processing zones (EPZs) 15 FDI industries 39 foreign investment regime 15–16 investment in China 35 tariff changes 97–100 tariff-jumping 47, 64 tariff protection 23 tax holidays 16, 25, 221 tax incentives 14, 20, 220–21 technological innovations 51–2, 53 technology effort index 181–2 technology generation 168 technology licensing 21, 23 technology sourcing centres 171 technology spillovers 170 technology transmission 168 Texas Instruments 63 Thailand 59, 62, 63, 80, 93, 110 capital flows 103, 108 FDI flows 33, 34, 109 FDI industries 40 foreign investment regime 16, 17 mergers and acquisitions 108 negative inflows 105 third world multinational enterprises (TWMNEs) 198–9, 217 Tiananmen Square 32 tradability/non-tradability 141 tradables/non-tradables 121, 143–4 282 Multinational enterprises in Asian development trade flow analysis 72, 97 trade policy regimes 142 trade restrictions 147, 163 on China 39 transitional economies 219 transportation, technical innovations 51–2 TWMNEs (third world multinational enterprises) 198–9, 217 UK R&D activities of US MNEs 178 R&D overseas expenditure 173 UN trade database 74–5 US Annual Survey of US Direct Investment Abroad 113 components trade 78 direct investment in Asian countries 38, 110, 111 electronics industry 51, 62 exports in crisis-hit countries 113 FDI inflows 33 final goods exports 95 manufacturing, employment share 115 manufacturing, productivity and indicators 157–8 R&D globalization study data 185, 195–6 domestic technological competency 181–2 expenditure 173, 174–7, 179–80 investment environment 182 model 180–85 other variables 182–5 product adaptation 180–81 R&D intensity determinants 180–91 regression results 186–91, 197 theoretical framework 169–71 trends and patterns 171–80 trade restrictions on China 39 vertical specialization see product fragmentation vertically integrated assembly industries 61, 206 vertically integrated high-tech industries 37, 42 vertically integrated international industries 51 Vietnam components trade 37, 78 ease of doing business indicators 226–7 export expansion 240–41, 242 export processing zones (EPZs) 248–9 FDI in economic transition, case study business environment 223–5 conclusions and policy inferences 246–7 FDI impact 234–46 FDI policy 220–23 FDI trends and patterns 225–34 indicators of ease of doing business 226–7 industry composition 231, 233–4 ownership structure 230 productivity growth 243–6 source country composition 231, 232 spatial distribution 234, 235 FDI industries 40 FDI inflows 33 foreign-invested enterprises (FIEs) 235–46 foreign investment regime 18–19, 220–23 investment data 225–8, 234–5 Investment Law (2006) 222–3 joint ventures 230 wages 42, 51, 53, 59, 79 differentials in East Asia 79, 80, 97 Warner, Andrew 136, 142 Western European multinational enterprises 52–3 World Bank database 136 world components trade 52, 75–7 World Economic Forum 223, 224 world manufactured exports 55–6 world manufacturing exports 54 World Trade Organization (WTO) 14, 16, 49 worldwide procurement networks 72 Yeats, Alexander 68 ... were concerned, but Multinational enterprises in Asian development PFI was more appropriate in mining and manufacturing, areas in which governments had little or no expertise In these areas, PFI... Cataloguing in Publication Data Athukorala, Prema-chandra Multinational enterprises in Asian development / Prema-chandra Athukorala p cm Includes bibliographical references and index International.. .Multinational Enterprises in Asian Development Other books by the author Saving, Investment and Growth in India [with Kunal Sen] (2003) Crisis and Recovery in Malaysia: The Role