Impact of government responses to COVID-19 on the resilience of FDI attractiveness factors in the Asian region

Abstract

PurposeThe purpose of this paper is twofold. Firstly, the paper aims to determine the separate effects of the COVID-19 pandemic and government actions represented by the index of stringency, containment and economic support on the attractiveness of foreign direct investment (FDI). Secondly, the paper aims to explore the impact of the interactions between the COVID-19 epidemic and government interventions on FDI.Design/methodology/approachThe study uses a panel data set of 30 Asian countries during the two pandemic years 2020 and 2021 to investigate the effect of government actions on the resilience of FDI attractiveness factors.FindingsThe empirical results reveal the negative effect of COVID-19 on FDI inflows and attractiveness factors. However, government responses have a positive and statistically significant effect on the FDI attractiveness factors such as economic growth, trade openness and human and technological capital development and contribute to the economic recovery of the Asian region.Practical implicationsThe empirical findings can provide useful information for policymakers in designing macroeconomic policies and taking government measures to improve their investment environment and attract FDI.Originality/valueThe study shows that government responses, economic support, containment and health policies are effective in containing viruses, reducing the impact of the COVID-19 pandemic and strengthening resilience in FDI attractiveness factors. It also indicates that foreign investors are responding positively to government measures.