PUBLICATIONS & REPORTS

Contents Introduction

The paper addresses the question of whether effects on economic growth of inward FDI differ according to the origin of investors. Implications are derived for trends of regionalism. To address the question, the magnitudes of productivity spillovers from foreign firms to local firms are measured using groups of foreign investors’ home regions with data for Indonesian manufacturing. The results of analyses suggest that MNCs from eastern Asian economies impart positive externalities to local firms, whereas MNCs from non-Asian countries did not impart significant effects. Furthermore, the results suggest that eastern Asian countries’ MNCs impart stronger effects than Japanese MNCs do, whereas the presence of Japanese MNCs enhanced the magnitude of spillovers from eastern Asian countries MNCs. These results support regionalism in eastern Asian economies, including Japan.