Investment attractiveness of East Asia to North American firms: The Threats of Partial Post-Crisis Reform

A benefit of the 1997-98 Asian crisis was said to be the impetus it gave regional governments to institute necessary reforms to avert future crises. With apparent revival from the crisis, such reform impetus has declined and observers now warn that lack of reform threatens sustained recovery based on long-term foreign direct investment, as opposed to short-term foreign bank debt and volatile foreign portfolio investments. However, little systematic empirical evidence has been produced to substantiate such observations. Using data from North American firms (n = 80) operating in the Asia-Pacific, this article shows that (a) multinational firms anticipated Asian crisis-prompted reforms that would improve overall business environments, (b) by 2000, lack of reform was regarded as a major problem facing firms in the region and (c) significant correlations between reforms and anticipated improved business environments exist, implying that FDI flows could suffer if reforms are not carried through.