Nationalism and Foreign Direct Investment: Evidences from Indonesia, Malaysia and Thailand

For host countries (HCs), domestic politics and political risk in HCs can affect the volume of their inward foreign direct investment (FDI). The factor of nationalism is often factored into both indicators while few studies directly discuss the relationship between nationalism and FDI. In this paper, I argue that nationalism affects inward FDI of HCs through nationalistic economic policies (economic nationalism).

Economic nationalism is more likely to happen and cause a decrease of inward FDI when political leaders find it convenient and beneficial to increase the chances of domestic political survival; otherwise, nationalism is less likely to result in economic nationalism detrimental to FDI. I test this hypothesis by analyzing quantitative data collecting from World Value Survey, Investment Policy Monitor Database of UNCTAD and Polity IV Project. Qualitative studies investigating anti-colonial, anti-Chinese and anti-western nationalisms occurring in Indonesia, Malaysian and Thailand in their post-colonial eras will also be provided. Evidences suggest that nationalism in some cases had caused decreasing FDI while some had not. Should the leader finds nationalism politically convenient and beneficial, it is more likely to be translated into unequal nationalistic economic policies to foreigners, which cause decreasing inward FDI.

Keyword: FDI, Nationalism, Economic Nationalism, Indonesia, Malaysia, Thailand

Author: Ian Tsung-yen Chen

Status: Working paper

History: This paper was accepted for presentation at the 2012 International BISA-ISA conference, BISA, Edinburgh, 2012 and was first presented at the CAPAS-CSEAS Workshop: Exploring Frontiers of Southeast Asian Area Studies, Academia Sinica, Taipei, August 9, 2011.

Full Text: Upon request