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Korean foreign direct investment in Southeast Asia in the late twentieth century

Lee, You-Il (1996) Korean foreign direct investment in Southeast Asia in the late twentieth century. PhD thesis, Murdoch University.

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Abstract

A significant development of South Korea's (or Korea) economic development has been an enormous increase of its foreign direct investment (FDI) in the Southeast Asian region, where, since the late 1980s, Korea has emerged as one of the principal investors. Particularly, more than half of Korean FDI in the region have been carried out by firms in small-scale and labour-intensive light industries such as apparel/textile, footwear and assembly of electronic products. This shows a clear departure from Korea's previous FDI pattern of the 1960s and 1970s, which has been concentrated mainly in such areas as mining, fisheries and forestry. Korean FDI in the Southeast Asian region after 1988 provides ample evidence concerned with the above development. In fact, Indonesia has now become one of the largest regional recipients of FDI inflows by Korean firms, particularly from labour-intensive manufacturers. A close examination of Korean FDI in Indonesia and other Asian countries of Vietnam and China since the late 1980s provides a rich area of discussion in the field of Asian political economy in general and Korea's and Indonesia's political economy in particular. These include debates within development theory concerning markets such as structural adjustment, the role of the state, class formation and capital accumulation and the changing nature of industrial policies in the course of capitalist industrialisation, particularly within the Asia-Pacific and Southeast Asian region.

This thesis examines how specific social relations (political and institutional), drive the rapid process of industrial capitalism in both investing and recipient countries and influence the overall behaviour of capital flows. Thus, this thesis deviates from conventional FDI theories of micro/macro-economic approaches and new international division of labour, focusing either on factor endowments (comparative advantages) or differences in unit labour costs in a firm’s decision to invest abroad. This is not to say these approaches are deficient. Instead, these theories can be strengthened if we extend our analysis to the structural and institutional dimensions of domestic and international political economic change such as the emergence of a bourgeoisie and a working class, a powerful state and the development of infrastructure, all of which coincide with other factors at work in the countries. A close analysis of Korea's political economy in the 1980s suggests that in addition to some economic variables (exchange realignments, changes in wage level), macro-political and social changes, such as these in the areas of state-society, state-business and state-labour relations (which have brought about economic changes in the late 1980s both in the investing and recipient countries) can offer more plausible insight into the progression of Korean FDI in the region in the late 20th century.

A major finding from this study is that the current behaviour of Korean FDI in Asia shows "gipsy", "prowling", "ad hoc", or "footloose" patterns. Korean firms move around the Asian region, looking for short term profits and compliant and low wage labour force. This is particularly evident in labour-intensive, small-scale and wage-conscious industries, established after 1988, including footwear, apparel and textile industries. Further, a through examination of Korean FDI behaviour in Indonesia provides a richer discussion on the political economy hypothesis. That is, in the process of intra-Asian capital flows among manufacturing industries and even capital-intensive industries, political and institutional variables, including favouritism, long-running practice of clientelism between the state and business and a culture of bureaucratic authoritarianism, can influence FDI behaviour every bit as much, if not more than, cost differences and factor endowments.

Item Type: Thesis (PhD)
Murdoch Affiliation: School of Social Sciences
Notes: Note to the author: If you would like to make your thesis openly available on Murdoch University Library's Research Repository, please contact: repository@murdoch.edu.au. Thank you.
Supervisor(s): Robison, Richard
URI: http://researchrepository.murdoch.edu.au/id/eprint/51142
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