Written by Mekong Institute

Many countries have recognized that FDI is an important source of economic growth of a country. Myanmar also highly appreciates FDI as a key solution for the reduction of the country’s development gap towards leading ASEAN countries. Thus, it is important to investigate the factors that help attracting FDI into the country. Vietnam, which is compared to Myanmar economically in a similar situation has altered its economy from a centralized system to a market-oriented one in the mid- 1980s.

Both countries have favorable investment environments, offering abundant cheap labor, natural resources and investment-friendly policies. This paper intends to analyze how both countries strive to attract FDI, and which variables determine the inflow of FDI into Myanmar and Vietnam during the period 1989 to 2012 by using linear regression analyses.

According to our analysis for Myanmar, the growth rate of GDP, the labor force, the inflation rate and the exchange rate affect the inflow of FDI. For Vietnam, only openness of the trade is statistically significant at the percent level implying that Vietnam’s FDI policies have a positive effect in attracting FDI.