The Impact of ASEAN-Korea Free Trade Agreement on Foreign Direct Investment

Abstract

This paper aims to analyze and examine the impact of ASEAN-Korea FTA on FDI flows into Korea and ASEAN countries to verify the economic validity of AKFTA. In order to analyze the impact of AKFTA on FDI, this study employs the knowledge-capital model by considering industrial development stages of countries. This study conducts panel data (2001-2012) analysis to alleviate unobserved heterogeneity and multicollinearity. The results show that the AKFTA 2006 Goods Agreement has a statistically negative effect on FDI in the member countries, while the AKFTA 2009 Investment Agreement has a positive impact on FDI in the member countries.