Determinants of Hong Kong manufacturing investment in China: a survey

Transcription

1 manufacturing investment in Xiaohe Zhang Assistant Professor, Department of Economics, School of Business, Hong Kong Baptist University, Kowloon Tong, Hong Kong Ho Po Yuk Research Postgraduate Student, Department of Marketing, Hong Kong Baptist University, Kowloon Tong, Hong Kong This paper aims to examine the determinants of foreign direct investment (FDI) in China by investigating Hong Kong s manufacturing industries established in Guangdong province, and to compare the difference between market-oriented and exportoriented, and between capital intensive and labor intensive FDI in investment decision making. A questionnaire survey is used to verify our argument. It is found that most of Hong Kong s manufacturing investments are labor-intensive and exportoriented. The most important determinants of Hong Kong s China are cheap labor and land, stable political environment, government incentive policies and high investment return. The most important location-specific advantages are geographical proximity to Hong Kong, better preferential treatment, good infrastructure, and absence of language barrier. It is also found that export-oriented FDI tends to be efficiencyseeking while market-oriented FDI appears to be resource-seeking. MCB University Press [ISSN ] [ 260 ] Introduction Foreign direct investment (FDI) in mainland China increased dramatically in the 1980s and early 1990s. During , the amount of realized FDI inflows increased at an average rate of 30 per cent per year. The capital inflow increased by 152 per cent and 150 per cent in 1992 and in 1933 respectively. At $38 billion in 1995, FDI accounted for 25 per cent of domestic investment, 13 per cent of industrial output, 31 per cent of exports, 11 per cent of tax revenues, and 16 million jobs (World Bank, 1997, p. 21). The rapid expansion of FDI enabled China to become the second largest host country and the largest recipient in developing world of FDI (United Nations Conference on Trade and Development, 1997). The rapid growth of FDI in China has been dominated by the capital originated from Hong Kong, which approximately accounted for three-fifths of the nation s total. Hong Kong has been China s largest external investor since In 1995, some four-fifths of Hong Kong s outward FDI went to China (United Nations Conference on Trade and Development, 1996, p. 53), and over a third of it has flowed into Guangdong. What are the characteristics of these Hong Kong outward FDI? What factors attracted such a huge amount of Hong Kong capital into China? Since it is well acknowledged that the firmspecific advantages in newly industrialized economies are different from those in more developed nations (Lall, 1984; Lecraw, 1981; Wells, 1981), do these differences affect the determinants of the Hong Kong s investment in China? Are there any differences in making investment decisions across different manufacturers? Dunning (1981) suggests that multinational enterprises (MNEs) will invest in a foreign location only if the latter offers certain location-specific advantages (LSAs) in terms of resources and facilities that make it possible for the MNEs to explore their firm-specific ownership advantages. Root and Ahmed (1979), Schneider and Frey (1985), as well as Dunning (1993), all suggest that market growth, availability of material supplies, physical infrastructure, and efficient administration are the most frequently cited LSAs in the host countries. Given a very unevenly distributed pattern of FDI in China s coastal provinces, what are the location advantages of Guangdong province, which alone absorbed more than one fourth of FDI in China? It is widely believed that FDI pattern in China is more likely to be determined by the LSAs. However, how to define these LSAs is still a problem. For instance, Lo (1989) argued that foreign partners are mainly motivated by the lower costs of production in China while political risk does not seem to be a main concern. Zhang (1994) pointed out that Guangdong had three important LSAs in comparison with the rest of China, i.e., its geographical proximity to Hong Kong and Macao, its historical and ethnic connections with overseas Chinese and its experience in dealing with the outside world. Using a linear regression model and time series data, Wang and Swain (1995, 1997) found that the size of the host country market, the relative lower cost of labor, and the cost of capital played a very important role in FDI inflow in China. By running a regression on cross-section data, Broadman and Sun (1997) discovered that five factors, namely the total GNP level as an index of potential market size, average wage as labor costs, educational level as stock of human capital, total length of transportation routes as infrastructure, and a dummy variable for geographical location, are all responsible for the distribution of FDI in China. Applying a panel data analysis, Liu et al. (1997) indicated that five factors, namely cultural differences, relative real changes in market size, bilateral trade, wage rates, and exchange rates are important determinants of contractual FDI, and the latter three factors affect realized FDI. Chen (1996) also reported an importance of the existence of good transportation linkages, technological filtering and to some extent, the potential for market-share extension, but not the wage level, in allocating FDI in different regions in China. Acknowledging the tremendous contribution of these studies, their drawbacks cannot be ignored. Since there are only 14 observations in Wang and Swain s regression, the robustness of their findings is dubious.

2 Broadman and Sun (1997) have the same problem of using only one year cross-section data of Except for Glaister and Yu (1993), who investigated the strategic motivation of the UK investors in China by a survey, most of the recent studies used aggregate data. Although aggregate data are useful to describe a general trend, they may also disguise the distinctions among different groups of investors, especially when the sources of FDI are greatly diversified. Furthermore, no particular attention has been paid so far to the relationship between factor intensity and strategic motivations (export-orientation and market-orientation) among different industries. The current paper attempts to fill the gap. The paper is divided into five parts. The next section introduces the characteristics of our survey. Some primary findings are then presented. This is followed by a theoretical discussion. Concluding remarks and policy recommendations are provided in the final section. The characteristics of the survey In order to understand which factor or factors had significantly influenced the decision making of the Hong Kong investors, a questionnaire survey was conducted in early The questionnaire was sent mainly by fax because using fax machines can yield higher returns at lower cost per questionnaire, as suggested by Dickson and Maclachlan (1996). The questionnaire contains nine questions. Seven are about the general information of the investing company. The remaining two questions are designed to examine the determinants of Hong Kong manufacturing FDI in China. Nine factors, abstracted from the current literature, are chosen to indicate the main determinants of Hong Kong s investment in China, and another ten factors are chosen to represent the LSAs in Guangdong. The respondents are required to rate these factors. The questionnaire is kept short to achieve a higher response rate and written in Chinese to avoid misunderstanding or misinterpretation of the terms by the respondents. Samples The questionnaire survey was conducted between January and February Among the 268 sample firms invested in Guangdong province, 170 were selected from the members directory 1996 of the Federation of Hong Kong Industries, 80 were selected from the 95 members Business Directory (China Business) of the Chinese General Chamber of Commerce. Most firms are medium to large size manufacturers with 100 or more employees in the production bases of China. Among the 268 questionnaires, 230 were sent by facsimile transmission, 20 by mail, and the remaining 18 by telephone interviews. The respondents were required to fax back their completed questionnaire before the due date. The questionnaire sent was addressed to the owners or representatives (whose name is listed in the directories) of the companies in Hong Kong. The respondents were asked to answer the seven questions about the background information and the two questions to rate the degree of importance of each determining factor based on a 5-point Likert scale (1 being the least important and 5 the most important). Any item that has not been answered was regarded as not relevant. In total of 72 questionnaires collected, 69 were valid. The survey achieved a response rate of 25.7 per cent, a satisfactory rate by international standard. The industry composition of the 69 respondents is shown in Table I. According to a classification of Hong Kong s industry types (Federation of Hong Kong Industries, 1993, pp ), electronics, electrical and optical products, toys, leather and rubber, wearing apparel and watches and clock, and other industries are classified as labor-intensive industries whereas paper and printing, metal products and machinery, and mould and die are classified as capitalintensive industries. Based on this classification, it is found that 53 (76.8 per cent) of the respondents are labor-intensive and 16 (23.2 per cent) are capital-intensive. The year and locations of investment Among the 69 manufacturers who responded to the questionnaire survey, three respon- Table I The industry composition of the samples Industry No of samples % Capital intensive Paper and printing Metal products and machinery Mold and die Labor intensive Electronics Electrical and optical products Toys Wearing apparel 9 13 Plastic, rubber and leather products Watches and clocks Others Total [ 261 ]

3 [ 262 ] dents had invested in China before the economic reform started in The remaining respondents invested in China during a period of 18 years since the reform. This survey reveals that Hong Kong s manufacturing investment in Guangdong province is concentrated in two cities Shenzhen and Dongguan (the distance between the two cities and Hong Kong is within 100 kilometers by land). The manufacturing labor costs in these cities were only one-tenth to one-fifth and factory rentals only one-tenth to one-quarter of those in Hong Kong in the early 1990s (OECD, 1995, p. 46). Out of the 69 sampled firms with 71 establishments, 40 (56.3 per cent) establishments were located in Shenzhen while 18 (25.4 per cent) in Dongguan. The rest of our samples located in some other cities such as Huizhou, Guangzhou, Zhongshan, Chaozhou, Zhuhai and Foshan in Guangdong province. Employment size With the 69 samples, the average employment size was 804 employees. The firms were classified into three categories: firms with less than 499 employees, firms between an interval of 500 to 999 employees, and firms with more than 1,000 employees. These categories accounted for about 69.6 per cent, 7.2 per cent and 23.1 per cent of the total sampled firms, respectively. It is worth noting that labor intensive firms employed 73.9 per cent of total labor force in our samples. All capital intensive firms with only one exception are in the category of less than 499 employment size category. Forms of investment Among the 69 survey samples, 26 (37.8 per cent) are involved in processing and assembling activities. This form of operation is the earliest way of economic cooperation between Hong Kong and China since the launch of the reform. The other forms of investment include 21 (30.6 per cent) wholly foreign-owned enterprises, 11(16.1 per cent) equity joint ventures and 6 (9.1 per cent) cooperative joint ventures, the so-called sanzi qiye in Chinese. Motivations for investment The respondents were asked to state whether their products were mainly produced for China s local market (market-oriented) or for overseas markets (export-oriented). From the survey results, it is found that 75.4 per cent of the manufacturers aimed at exporting their final products to overseas market, while 24.6 per cent selling their products in China s local market. In order to compare the different responses in different firms and find out the relationship between factor intensity and the degree of export-orientation, a cross-tabulation is used. It is found that 80.4 per cent of the labor-intensive firms were export-oriented, while the export-oriented firms in the capitalintensive group were as low as 38.9 per cent (Table II). This result suggests that laborintensive firms are more likely to be exportoriented whereas capital-intensive firms more local market-oriented. Table II Investment motivations between different firms (% of respondents) Labor-intensive Capital-intensive Export-oriented Market-oriented Total (percent) Source: Survey questionnaire The determinants of FDI in China According to the analysis of Schneider and Frey (1985), the determinants of FDI are classified into three categories: namely economic, political and social factors. In our survey, seven economic factors, one political and one social factor are chosen as the determinants of investing in China. The left column of Table III reports the numbers of respondents who have chosen that factor as the most important determinant. Percentages are reported in the brackets. For economic factors, 44 respondents (63.8 per cent) regarded low labor cost and 41 respondents (59.4 per cent) considered the low land cost as the most important determinant, respectively. Eighteen respondents (26.1 per cent) thought the incentive package granted was most attractive. Thirteen (18.8 per cent) chose high investment return, eight (11.6 per cent) considered China s market and six (8.7 per cent) responded the supply of raw material in China as the most important determinant. For the political factor, 20 respondents (29 per cent) considered that China did offer a stable political environment for foreign investors. This reflects an increasing confidence in China s political environment after the Tiananmen incident. For the social factor, Chinese connection was interpreted as whether the ethnic ties (the same ethnic group) had been considered as a determinant. From the viewpoints of investors, only five respondents (7.2 per cent)

4 thought it is the most important factor. Thirteen respondents (18.8 per cent), on the contrary, considered the Chinese connection the least important. Other factors that have been considered by some of the respondents as the most important include the trends of investment climate, the reallocation of client s production to China and the humanized obligation (Renqing Guan-xi). Apart from that, nine respondents (13 per cent) believed that the advanced technology in China is the least important factor. No respondents considered this factor the most important. (14.5 per cent) chose proximity to their target market, seven (10.1 per cent) considered the availability of technicians and skilled laborers, six (8.7 per cent) thought the supply of their needed raw materials, and two (2.9 per cent) believed that good infrastructure was the most important determinant factor. For social factors, nine respondents (13 per cent) stressed that good relationship with the Chinese partners or local government officials was very important, five (7.2 per cent) considered the absence of language barrier, and two (2.9 per cent) believed that the location of suitably qualified potential partners in Guangdong, was the most important factor. Table III The determinants of FDIs in China and LSAs in Guangdong Category, variables, respondents and percentage China Guangdong Economic Low labor cost 44 (63.8) Proximity to Hong Kong 46 (66.7) Low land cost 41 (59.4) Better preferential treatment 14 (20.3) Government incentive policies 18 (26.1) Proximity to the target market 10 (14.5) High investment return 13 (18.8) Availability of technicians and skilled workers 7 (10.1) Large domestic market 8 (11.6) Proximity to resource supply 6 (8.7) Sources of raw materials 6 (8.7) Good infrastructure 2 (2.9) Advanced technology in China 0 (0) Location of suitably qualified potential partners 2 (2.9) Political Stable political environment 20 (29) Social Chinese connections 5 (7.2) Good relationship with Chinese partner/local authorities 9 (13) Absence of language barrier 5 (7.2) My homeland 0 (0) Note: Classification was based on Schneider and Frey, 1985, p. 163 Source: Survey questionnaire Location-specific advantages in Guangdong The right column of Table III shows the impact of seven economic and three social factors that may attract Hong Kong investors into Guangdong province. The political factor is assumed to be a nationwide issue so it has no particular impact on the LSAs in Guangdong province. Among the seven economic factors, the most favored LSA in Guangdong is its geographical proximity to Hong Kong. Forty-six respondents (66.7 per cent) considered that the geographical proximity was the most critical factor. Fourteen respondents (20.3 per cent) thought that better preferential treatment offered by the Guangdong local authorities was more important. Ten respondents A statistical summary The respondents were required to rate the degree of importance of each stated determinant factor. When a factor was indicated as the least important, a value 1 was assigned, value 2 was assigned to unimportant, value 3 to average, value 4 to important ; and value 5 to the most important. Any determinant that has not been answered was regarded as not relevant and a value 0 was assigned. The mean values and standard deviation of each rating are shown in Table IV. The statistical summary of Table IV is consistent with the percentage share approach of Table III. While the most important factor of investing in China is concentrated on some efficiency-seeking or cost-minimizing considerations, the factor determining the investment in Guangdong province is dominated by the LSAs. Low labor and land cost, stable political environment, government incentive policies and high investment return were ranked as the most important factors of entry. The proximity to Hong Kong, correspondingly, was the most important factor to attract the investors to choose Guangdong as an ideal destination of their capital. This is followed by better preferential treatment, good relationship with the Chinese partner and local authorities, absence of language barrier, availability of technicians and skilled workers, as well as good infrastructure. The relationship between market-oriented and export-oriented industries By applying the cross-tabulation approach, a relationship in the major determinants between market-oriented FDI and exportoriented FDI can be analyzed. As shown in Table V, about three-fourths of the exportoriented FDI attributed low labor cost and low land cost as the most important factors of investing in China. Nearly the same percentage (73.8 per cent) of respondents considered the proximity to Hong Kong as the most [ 263 ]

5 [ 264 ] Table IV Descriptive statistics among study variables Variable Mean Standard deviation China Low labor cost Low land cost Stable political environment Government incentive policies High investment return Chinese connections Large domestic market Sources of raw materials Advanced technology Others Guangdong Proximity to Hong Kong Better preferential treatment Good relationship with Chinese partner/ local authorities Absence of language barrier Availability of technicians and skilled workers Good infrastructure Proximity to the target market Proximity to resource supply Location of suitably qualified potential partners My homeland Others Table V The comparison between market-oriented and export-oriented FDI: in labor and land costs, and geographical proximity (% of respondents) Determinants Low labor cost Low land cost Proximity to HK Export-oriented Market-oriented Total (%) important factor to make them invest in Guangdong. In contrast, the corresponding shares in the market-orientated firms are slightly over one-fourth by average. Hence, it is concluded that exported-oriented FDI tends to be efficiency-seeking, that is to explore the low-cost labor and land in China, and to locate production near Hong Kong to minimize their transportation cost. Through the survey, it is also found that in general, the market-oriented firms are more concerned about the domestic market size, the sources of raw materials, and the proximity to resource supply and target market, than those export-oriented firms. As shown in Table VI, the preference shares are about 10 percentage points higher in the former than those in the later. It is therefore concluded that market-oriented FDI (market-seeking FDI) are more likely to be resource-seeking, and aimed at China s potential market. Discussion Our survey provides several different results, in contrast to earlier studies. This may have revealed some differences in both motivations and determinants of outward FDI between Western countries and the newly industrialized economies. The following discussions, however, will merely verify these differences and give some primary explanations. Difference in key determinants of FDI Our survey reveals that, the following factors, in a rank order, are the most important determinants of Hong Kong manufacturers investments in China: cheap labor and land costs, government incentive policies, stable political environment and high profit return. Other factors such as sources of raw materials, size of domestic market, advanced technology and Chinese connections are not critically important. In comparison with previous studies, this study provides some opposite evidences. In a recent survey of motivation in UK-Sino joint ventures, Glaister and Wang (1993, p. 12) reported a different ranking of motivation by the investors from the UK. The most important strategic factors are ranked as[1] faster entry to market[2] to facilitate international expansion[3] to conform to host government policy and[4] faster pay back on investment. Even for the specific motives, to gain access to a large potential Chinese market appears to be extremely important. This is consistent with the findings of Forsyth (1972), Agolo (1978), Miller (1993), and Lanks and Venables (1996), among others, to suggest that while the size and growth of market are distinguished on FDI decisions, low labor cost only has a very limited influence. A big difference in strategic motivations among different investors exists, if one compares our study with that of Glaister and Yu (1993). While the Hong Kong investors are attracted by some cheap resources (the cost of labor and land), the UK investors are aimed at

6 China s potential domestic market. This reveals that low-cost labor is particularly important for labor-intensive industries moved from Hong Kong to China. Owing to labor shortage and rising land cost, Hong Kong s manufacturers, in order to maintain their competitiveness in the world market, have to relocate their production bases to countries where the cost of labor and land is low. China s preferential policy also plays an important role in reducing production cost of Hong Kong s export-oriented investment. Therefore when the tax system was unified in 1994, especially when exemption from import duties granted to foreign affiliates was eliminated in April 1996, the contract value of Hong Kong s investments in China declined substantially. For instance, the contract value of Hong Kong s FDI in China decreased by 12.7 per cent in Table VI The comparison between market-oriented and export-oriented FDI: in domestic market, sources of raw materials, proximity to target market and resource supply (% of respondents) Domestic Source of raw Proximity to Proximity to Determinants market materials target market resource supply Export-oriented Market-oriented Total (%) Political instability has been identified as a main obstacle to attract FDI in developing countries. However, this study, together with Lo (1989), and Wang and Swain (1995, 1997), argues that Hong Kong s manufacturers seem to be more confident on China s political stability than the Western investors. It is also noted that unlike the UK investors, the Hong Kong investors did not consider too much about the huge potential market in China as a major attraction. This is because that most of the Hong Kong firms invested in China have been labor intensive and targeted to sell their products in the world market. Their establishments in China, therefore, can be seen as merely a processing base for these exports. Location specific advantage This survey found that the major LSAs in Guangdong are its proximity to Hong Kong, better preferential treatment, good relationship with Chinese partners and local authorities, absence of language barrier, availability of technicians and skilled laborers as well as good infrastructure. These findings are consistent with some previous studies (Chen, 1983; Federation of Hong Kong Industries, 1992; Zhang, 1994). Other factors such as proximity to target market and resource supply, location of suitable and qualified potential partners and a centripetal consideration to the homeland are not critically important. In searching of the factors that affect location selection, Glaster and Yu (1993, p. 13) reported a degree of significance in the location of partner and proximity to target market. The target market consideration seems to be in accordance with the strategic motivations of the UK investors, yet different from the Hong Kong investors we investigated in our survey. Guangdong s attractiveness lies in its proximity to Hong Kong, and the privilege to offer more favorable incentives to attract foreign investment. Infrastructure such as the provisions of transportation, telecommunications, water and electricity are also more well developed in Guangdong than the nation as a whole (Wong, 1988, p. 192). The close cultural proximity and ethnic ties, together with the ability to communicate in the same language, all help to facilitate business negotiation and ease the management problem for Hong Kong-Chinese firms. Those advantages are exclusively beneficial to Hong Kong s investors. Although labor cost in Guangdong is higher than other provinces in China, it still remains lower compared with the level in Hong Kong. Therefore, it is the international wage differential that, rather than provincial gaps in labor cost within the country, determines the allocation of FDI in China. This is particularly true when the relatively higher labor costs are accompanied by a higher labor productivity in Guangdong. Conclusion and recommendations This research provides a general picture of the determinants of FDI in China and the LSAs in Guangdong, from the viewpoint of the Hong Kong manufacturing investors who have been the largest source of China s inward FDI since The findings show that labor-intensive firms tend to dominate Hong Kong s investment in China and they usually tend to be export-oriented and efficiency-seeking. On the other hand, capitalintensive firms are more likely to be marketoriented and resource-seeking. Though it is consistent with most previous studies, it is also found that differences exist among investors from different sources, especially when factors such as labor cost and market size are concerned. Since different types of FDI have different motives in investing in China, the policy [ 265 ]

7 [ 266 ] makers should consider this difference and adopt corresponding policies to stimulate one and/or restrict another. As China has become more selective in screening FDI projects to ensure the realization of its targets, the government could control, to a certain extent, the type of FDI or industries to be particularly important to China s economic development through identifying the determinants which are more important to that type of FDI. A recent example is that the changes in fiscal incentive in China in 1994, together with the unification of the two-tier foreign exchange rates, have resulted in an increase of FDI from the Western countries and a decline of FDI from the East Asia newly industrialized economies. Though this change is consistent with our analysis above in reference to the different motivations of the FDI in different sources, it may not be the one that the government originally expected. Without the help of capital inflow from Hong Kong, China s export-oriented growth along its coastal provinces could not be sustained. Looking at the existing stage of economic development in China, its comparative advantage on producing and exporting labor-intensive industries is still enormous. Therefore it will be wise to continue to attract FDI from Hong Kong to support its export-oriented growth. Since Hong Kong s investment in China is expected to be mutually beneficial, the Chinese government should make use of this advantage and continually improve the investment environment to attract FDI from the Special Administrative Region. References Agolo, O. (1978), The determinants of US private manufacturing investments in Africa, Journal of International Business Studies, Vol. 9 No. 3, Winter, pp Broadman, H. and Sun, X. (1997), The distribution of foreign direct investment in China, The World Economy, Vol. 20 No. 3, pp Campbell, N. and Adlington, P. (1988), China Business Strategies, Pergamon Press, Oxford. Chen, C. (1996), Regional determinant of foreign direct investment in mainland China, Journal of Economic Studies, Vol. 23 No. 2, pp Deshpande, A. (1996), The role of foreign capital in Chinese reforms: a survey, China Report, Vol. 32 No. 3, pp Dickson, J.P. and Maclachlan, D.L. (1996), Fax surveys: return patterns and comparison with mail surveys, Journal of Marketing Research, Vol. XXXIII, February, pp Dunning, J.H. (1981), International Production and the Multinational Enterprise, Allen & Unwin, London. Dunning, J.H. (1993), Multinational Enterprise and the Global Economy, Addision-Wesley, Wokingham. Federation of Hong Kong Industries (1992), Hong Kong s Industrial Investment in the Pearl River Delta, 1991 Survey among Members of the Federation of Hong Kong Industries, Federation of Hong Kong Industries, Hong Kong. Federation of Hong Kong Industries (1993), Investment in China: 1993 Survey among Members of the Federation of Hong Kong Industries, Federation of Hong Kong Industries, Hong Kong. Forsyth, D.J.C. (1972), US Investment in Scotland, Praeger, New York, NY. Glaister, K.W. and Yu, W. (1993), UK joint ventures in China: motivations and partner selection,, Vol. 11 No. 2, pp Lall, S. (1984), The New Multinationals: The Spread of Third-world Multinationals, John Wiley, New York, NY. Lanks and Venables (1996), Foreign direct investment in economic transition: the changing pattern of investment, Economics of Transition, Vol. 4 No. 2, pp Lecraw, D.J. (1981), The internalization of firms from LDCs: evidence from the ASEAN region, in Krumar, K. and Mcleod, M. (Eds), Multinationals from Developing Countries, Lexington Books, Lexington, MA, pp Liu, X., Song, H., Wei, Y. and Romilly, P. (1997), Country characteristics and foreign direct investment in China: a panel data analysis, Weltwirtschaftliches Archiv, Vol. 133 No. 2, pp Lo, W. (1989), New Developments in China Trade: Industrial Cooperation with the West, The City University, Hong Kong. Miller, R.R. (1993), Determinants of US manufacturing investment abroad, Finance & Development, Vol. 30, pp OECD (1995), Foreign Direct Investment: OECD Countries and Dynamic Economies of Asian and Latin America, Organization for Economic Cooperation & Development, Paris. Root, F.R. and Ahmed, A.A. (1979), Empirical determinants of manufacturing direct foreign investment in developing countries, Economic Development and Cultural Change, Vol. 27, pp Schneider, F. and Frey, B.S. (1985), Economic and political determinants of foreign direct Investment, World Development, Vol. 13 No. 2, pp United Nations Center on Transitional Corporations (1992), The Determinants of Foreign Direct Investment: A Survey of the Evidence, United Nations, New York, NY. United Nations Conference on Trade and Development (1996), World Investment Report 1996: Investment, Trade and International Policy Arrangements, United Nations, New York, NY. United Nations Conference on Trade and Development (1997), World Investment Report 1997: Transnational Corporations, Market Structure

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