Determinants of FDI Flows into Indonesia and Singapore

Abstract

This paper reveals the determinants of FDI flows into Indonesia and Singapore. The empirical evidence based on the small sample cointegration test shows that, in case of Singapore, market size appears to influence FDI inflows positively and significantly, while production factor costs are revealed not to influence those. For Indonesia, neither market size nor wage is revealed to be significant, while interest rate is revealed to have a positive and statistically significant effect on those. This result discredits the sweatshop labor argument relating to FDI flows into developing countries.