The Role of Foreign Direct Investment on Trade and Technology Innovation in Southeast Asia with Particular Reference to Timor-Leste

Author: Felix Alberto Sequeira Alves Piedade

Sequeira Alves Piedade, Felix Alberto, 2018 The Role of Foreign Direct Investment on Trade and Technology Innovation in Southeast Asia with Particular Reference to Timor-Leste, Flinders University, College of Humanities, Arts and Social Sciences

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Southeast Asia has been receiving increasing amounts of Foreign Direct Investment (FDI) in recent decades. Its share of total FDI to Asia rose from only 8% in 1980 to 30% in 2016. Timor-Leste, the newest country in the Southeast Asian region has experienced a similar positive growth in its FDI, with a 19-fold increase between 2003 and 2016. This thesis examines the role of FDI on trade and technology innovation in Southeast Asia with particular reference to Timor-Leste. This research addresses four main objectives: (i) to identify the determinants of FDI; (ii) to examine the role of FDI in trade, (iii) to investigate the role of FDI in technology innovation and (iv) to recommend appropriate policies to enhance the volume of FDI to Timor-Leste.

This thesis is based mainly on an analysis of available secondary data for the period 1980-2016 for all Southeast Asian countries. However, in the case of Timor-Leste, the required data are available only for 14 years from 2003 to 2016. The data for Timor-Leste have been augmented by qualitative information gathered through semi structured interviews of 15 participants comprising government officials and company executives. The secondary data were analysed by using the Granger causality test in EViews software and the qualitative data were analysed by thematic analysis in NVivo software. The results of secondary data analysis show that trade through both exports and imports are one of the main determinants of FDI in Southeast Asian countries. In the case of Timor-Leste, unlike the other countries of the region, the majority of foreign companies are reported to have invested in Timor-Leste due to the country’s tax reform and political stability. FDI has played an important role in trade and technology innovation in the majority of Southeast Asian countries. For Timor-Leste, FDI has been more influential in the country’s imports compared to its exports and it has had no significant influence on Timor-Leste’s technology innovation. The results of interviews are consistent with the results of secondary data analysis for Timor-Leste.

This thesis presents some important lessons that Timor-Leste can learn from the experience of other Southeast Asian countries. These lessons include: improving the business environment, investing in the non-oil sector, adopting import substitution and boosting export promotion. This thesis further recommends that the Government of Timor-Leste should reinforce the existing initiatives to promote local products in addition to the development of human resources.

Keywords: FDI, Trade, Technology Innovation, Southeast Asia, Timor-Leste

Subject: Policy and Administration thesis

Thesis type: Doctor of Philosophy
Completed: 2018
School: College of Humanities, Arts and Social Sciences
Supervisor: Associate Professor Udoy Saikia