FDI Variations in Emerging Markets: The Role of Credible Commitments—With Special Reference to Asia

Abstract

What accounts for variations in foreign direct investments (FDI) in emerging telecommunications markets? This article shows that the key to capturing FDI flows is making and enforcing credible commitments both internationally and domestically toward liberalization reform in telecommunications sectors: the differences in such commitments account for FDI variations. The commitments made by emerging markets in the World Trade Organization’s (WTO) telecommunications accord are first examined. Furthermore, a qualitative analysis of four important Asian markets seeks to correlate such commitments with FDI flows. The case of China is conceptually and empirically interesting: the country’s size, growth rate, and state-led coordination mechanisms create a credible commitment illusion, at least in the short run.