Should I Stay or Should I Go? – Taiwan’s Foreign Direct Investment (FDI) Inflows and Outflows

Abstract

This study offers a fresh empirical evidence on the relationship between approved foreign investment (inflows) and approved outward investment in Taiwan. More precisely, it focuses on the Go South policies, which was initiated by the former president, Lee Teng-hui in 1992 that includes negotiating bilateral agreements with Southeast Asian countries to promote investment and other economic cooperation. Since 2012 Taiwan’s outflows of foreign investment is observed to be more than its inflows. This study shows that manufacturing is a prominent industry for both Taiwan’s foreign investment inflows and outflows. Indeed, Singapore is the top country among the New Southbound Policy (NSP) participated countries with their bilateral investment, then is Malaysia. This study also finds that both Taiwan’s approved foreign investment and approved outward investment are positively correlated, and they are interdependent over the period between 1959 and 2017. This study briefly discusses the feasibility of Go South policies, and their implications.

Keywords

• foreign investment
• go south policy
• granger non-causality
• taiwan