ABSTRACT
Foreign direct investment (FDI) was associated with negative perceptions, but recent experiences, particularly those experienced by the Asian Newly Industrialising Economies, have brought an awareness that it promotes the economic growth process through its spillover effects on capital formation, human resources development, new technology transfer, and international trade. The review on the regionalism effects, i.e. tax-discrimination, market size and market growth, demonstrated that their impact on FDI varies with the level of integration and the level of economic development but generally diminishes with decreasing levels. The structural model was also used to capture the simultaneous relationships between growth and FDI, and between FDI and the spillover effects variables; and the effects of regionalism on FDI in these economies. It was developed further and converted into a final form which was able to capture the dynamic effects of policy over the endogenous variables via the impact, interim and total multipliers.
