ATTRACTING FOREIGN-INVESTMENT - THE ROLE OF INVESTMENT INCENTIVES IN THE ASEAN OPERATIONS OF TRANSNATIONAL CORPORATIONS

Policymakers in many developing Asian countries have commonly relied o n investment incentives as a major policy instrument to attract foreig n investment. Using comparative case studies of Asian transnational co rporations (TNCs) in Southeast Asia, this paper argues that investment incentives per se are ineffective in attracting foreign investment. T he paper first examines the role of government incentives in the inflo w of foreign investment, with particular reference to the Southeast As ian region. It then provides a comparative study of Hong Kong and Taiw anese investments. Hong Kong TNCs are shown to have invested in Southe ast Asia because of market or market-related reasons, not investment i ncentives per se. To these firms from Hong Kong, investment incentives are more a kind of post hoc rationalization of their decision making. For the Taiwanese investors in Malaysia, government incentives are le ss important than the existence of market access and the friendly host country environment. The paper also suggests some implications and sp ecific policy recommendations for policymakers in host country governm ents. Instead of over-reliance on investment incentives, host country governments should be more concerned with: 1) a commitment to internat ionalization through the promotion and marketing of international imag es; 2) the upgrading of domestic resources through continuous training and development; 3) a more efficient allocation of resources; 4) supr a-national coordination and promotion.