Responses to globalization in East Asia and Latin America: the activity locations of multinational manufacturers in the Asia-Pacific

Abstract

Arguably, no region in the world has benefited more from the globalization of the world economy over the last thirty years than East Asia. At the same time, the prevailing wisdom has been that they have not benefited from globalization to the same extent. The present paper shows that the differences in economic performance between East Asia and Latin America can be attributed in part to differences in their linkages with the global economy. It goes on to show that different corporate activities can represent different types of foreign investment. Data from a survey of manufacturing multinationals active in the Asia-Pacific region shows that the determinants of foreign investment differ by activity. This indicates that nations interested in attracting different corporate activities might wish to adopt different policy mixes. The results indicate that investments in infrastructure and managerial capabilities can contribute to an economy’s ability to attract a broad range of corporate activities. Results on tariffs and capital controls do not support the Washington consensus that greater openness will lead to greater investment. Instead, the results support the revisionist view that protection and a relatively active government have contributed to the attraction of foreign direct investment and the development of the Asian economies.