Measurement of Weights of Risk Factors for Foreign Investors Considerations in Investing in CLMV Group
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Abstract
The objectives of this research were to measure the weights of risk factors for direct investment of investor in CLMV countries and aanalyze the impact of foreign direct investment risks on the inflow of foreign direct investment to CLMV countries. The research was conducted using the FIRM model based on McGowan and Moeller's method. The two dimensions of risk factors that were selected consisted of the political dimension, including political and economic stability, corruption of government officials, and economic dimension consisting national income per person, inflation rate, and the difficulty of doing business. The data was analyzed from the international organizations published on the website between 2002 and 2019. The regression analysis was used to analyze the impact of calculated risks on foreign direct investment flows from FDI to CLMV countries. The results found that the weight of each risk factor that foreign investors have determined in Cambodia has an average weight in the political dimensions of 0.65, 0.20, and -1.20, and the economic dimensions of 0.59, 0.68, and -0.48, respectively. In Lao PDR, the political dimensions were weighed at 19.83, -2.28, and -32.77, and the economic dimensions were weighed at -1.66, -4.31, and 10.10, respectively. In Vietnam, the political dimensions were weighed at -0.96, -1.79, and -4.19, and the economic dimensions were weighed at 6.15, 2.09, and -1.73, respectively. In Myanmar, the appropriate value in the political dimensions were at 0.20, 0.32, and 0.60, and the economic dimensions were at 0.17, 0.15, and 0.50, respectively. Positive weight-risk factors have had positive effects on FDI risk, and negative weight-risk factors on FDI was FDI investment barriers in CLMV countries. The coefficients were used to calculate FDI risk and resulted in a a positive impact on FDI flows in a regression model with a significant level of 0.01 for Cambodia, Lao PDR and Vietnam, Myanmar was significant at the level of 0.05.
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