EFFICIENCY ANALYSIS OF CHINA’S OUTWARD FOREIGN DIRECT INVESTMENT IN ASEAN COUNTRIES

Abstract

This study aims to compute the efficiency scores of China’s ODI in ASEAN
countries over the period from 2005 to 2016 and identify the inefficiency
determinants that affect the efficiency scores. A stochastic frontier gravity
model was employed in the study. The overall performance of China’s ODI
in ASEAN countries is at inefficiency level, meanwhile the low performance
of China’s ODI indicated a higher potential level to improve. The secondstage analysis is a panel model regression to identify the inefficiency
determinants by using the efficiency scores that derived from first-stage
analysis as the dependent variable. The variables used in the second-stage
analysis are language, voice and accountability, political stability,
government effectiveness, regulation quality, rule of law, and control of
corruption. The results showed language, voice and accountability,
regulation quality, rule of law, and control of corruption are statistically
significant towards the efficiency scores. ASEAN countries are
recommended to enhance their government ability thus improve the
regulation quality and rule of law