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Contents Introduction

This paper analyzes trends in foreign direct investment (FDI) by multinational corporations (MNCs) investing in and out of Asia in the years surrounding three major, recent economic downturns. It first finds that FDI flows, both inward and outward, generally continued upward trends during periods of crisis. Relatively large increases in inward stocks were observed for inward investors in most hosts (11 of 14) during the Asian financial crisis surrounding 1998, and were also observed in about half (6-7) of these economies surrounding subsequent downturns in 2001 and 2009. For outward flows, relatively large increases were observed in only about one third of the economies during all three downturns. Second relatively strong, negative (-0.5 or less) correlations between trends in cumulative FDI-GDP ratios and economic growth were common among inward investors in 1996-2000 and both inward and outward investors in 2007-2009. On the other hand, positive correlations were not very common. There is thus some evidence that MNCs have tended to increase their FDI stocks relatively rapidly during periods of economic downturn. This pattern is consistent with the view that MNCs are often better able to take advantage of buying opportunities that emerge during downturns than other firms, partially because they tend to be relatively large and are able to access capital relatively easily. On the other hand, there is a tendency for relatively high FDI growth to be concentrated in the same host and home economies, suggesting that country-specific factors may be relatively important determinants of FDI growth.