ABSTRACT
The evaluation of investment incentives has established some policy-induced reasons for the superior presence of Japanese companies in Association of Southeast Asian Nations countries. This chapter focuses on the extent to which the alternatives have been pursued by European Communities (EC) companies, the economic policy determinants for the respective choices made and the impact of production and investment decisions on trade flows. The process of economic integration within the EC has eroded incentives to invest in member states in order to circumvent trade barriers against direct exports. Whether regional subsidies granted by the EC have in fact been instrumental in directing foreign direct investment to backward EC areas instead of developing countries is difficult to prove empirically. A strong trade orientation towards Europe of course reflects the ongoing process of economic integration supported by geographical proximity and lacking communication barriers.
