1.

0 Introduction

Since the 1980s, FDI in the global economy has been experiencing rapid and steady growth (Chakrabarti,
2001; Huang, 2002). Continuously, foreign direct investment (FDI) has risen as the most imperative
wellspring of outer assets streams to developing countries over the 1990s, and has turned into a significant
part of capital development in the nation (Kumar and Pradhan, 2002). FDI inflows part of economic
phenomena such as globalization, liberalization and economic integration (UNCTAD, 2009). According to
Borenzstein, De Gregorio and Lee (1995) states that FDI can be an essential channel for bringing learning
and combination into worldwide generation chains which are required for effective exports procedure by
developing country. Moreover, apart from making investible funds available, FDI inflow to developing
countries is assumed to produce externalities through technology transfer and spill-over effect (Carkovic
and Levine, 2002), which have a last longing effect on the economy.

Trade openness or the connection of any nation to the worldwide economy after some time has all around
been the issue of enthusiasm to market analysts, organizers and strategy creators (Greenaway et al., 2002).
As indicated by UNCTAD (2009), numerous developing countries, including the slightest created ones, ought
to pull in just little measures of FDI inflows in spite of their endeavors towards monetary liberalization in an
increasing globalizing world. In this intense financial time, foreign direct investment certainly assumes a
critical part in monetary development. As researched, numerous components are found to influence policy
makers' choice on the country to put resources into and how arrangement producers draw in more FDI
inflow to developing countries.

1.3 Research Objectives

[1] To assess whether tariff / quota rate affects inward FDI attraction.

[2] To assess whether import / export ratio affects inward FDI attraction.

[3] To assess whether regulation of easiness of doing business affects inward FDI attraction

2. Literature review.

Numerous creators characterize openness to trade is a proportion of the total of imports and export (trade)
to GDP (Chang et al., 2009; Lee et al., 2004). In the interim, (Frankel and Romer, 1999; Irwin and Tervio,
2002; Noguer and Siscart, 2005) use trade to-GDP proportions as the premise for characterizing markers of
openness that incorporate different variables. Furthermore, Chang, Kaltani, Loayza (2005) bring up that
openness advances the effective designation of assets through relative comparative advantage, allows the
dissemination of learning and innovative advance, and empowers rivalry in local and worldwide markets.
Bjorvatn (2000), characterize FDI is an investment made to procure a long-term interest for a foreign
enterprise with the motivation behind having a compelling voice in its administration. Bjorvatn (2000),
characterize FDI is an investment made to procure a long-term interest for a foreign enterprise with the
motivation behind having a compelling voice in its administration.

Examining the theoretical model, The Uppsala Model of internationalization procedures by (Johanson and
Vahlne, 1977) recommended that an organization in their internationalization forms incrementally
expands their dedication on a foreign market by expanding their vicinity over the long run and information
of the business sector develops. Theory of factor endowment (1933) by Heckscher-Ohlin states that trade
have opportunities and capital streams between two nations rely on upon the relative endowment of
elements of creation. The theory suggests multinational endeavors put resources into nations to exploit
higher degrees of profitability or low creation cost. Michael E. Doorman's Diamond Model (1990), the
theory of competitive advantage contends that a country's aggressiveness relies on upon the limit of its
industry to enhance and overhaul.

While investigating the empirical literature, Charkrabarti (2001) states that there is mixed proof
concerning the noteworthiness of openness that is measured for the most part by the ratio of import plus
exports to GDP in deciding FDI. In other research, Awan Khan and Zaman (2011) additionally examined the
relationship between the level of openness to trade and FDI by took the sum of import and exports every
year as the pointer of trade openness. Their result demonstrated that the level of trade openness is very
noteworthy with a positive sign implying that the foreign investors would lean toward making interest in
country with a higher level of trade openness. Essentially, (Karim, Winters, Coelli and Fleming, 2003)
likewise battles that the more noteworthy export level may energize more prominent FDI in the host
country when FDI is viewed as corresponding to trade. Additionally, Singh and Jun (1995) likewise find that
export orientation is essential in drawing in FDI. It is clear that extension of exports can comes about
because of FDI, if there are moderately vast contrasts in resource endowments between the home country
and host country (Liu, Wang, Wei, 2001).

Numerous studies have explored the part of simplicity of working together for FDI in different countries
(Jayasuriya, 2011; Corcoran and Gillanders, 2012; Anderson and Gonzalez, 2013). Jayasuriya (2011) finds
that Doing Business positioning influences emphatically FDI inflows for all countries. Examination the
connection between investment climates, Nnadozie and Njuguna (2011) found that business rules and
regulations are essential for FDI specifically and winning business regulations and FDI in Africa. In any case,
related exploration finds that business regulations as measured by Doing Business impact the effect of FDI
inflows though economies with more powerful regulations for beginning a business advantages more from
the FDI inflows that they get (Busse and Groizard, 2008).
 2.4 Conceptual Framework

Independent Variables

Import and Export Ratio

Regulation / ease of Trade Openness Foreign Direct Investment

doing business Dependent Variable (Dependent variable)

Tax rates (tariff, quota)

FDI is viewed as in charge of expanded welfare in the host country because of the advantage
connected with presentation of new innovation and advancements, new administrative
methods, improvement of extra aptitudes, expanded capital, work creation and change of
working conditions and the advancement of mechanical segment in the host country (Perez,
1997; Haddad and Harrison, 1993; Markusen and Venables, 1999). FDI empowers the host
nation to accomplish the investment level past its ability to enhance GDP and monetary
development (World Bank, 2002). As mentioned by Musila and Segue (2006); Mc Aleese (2004),
FDI gives a straight forwardness to developing countries to get to and learn new innovation,
make administration and work talented and compelling.

Basu and Guariglia (2007) underscored trade openness as a urgent determinant for the effect of FDI on
development, as they discover two-path causality in open economies, both in the short and the long run,
though the long run causality is unidirectional from development to FDI in moderately shut economies.

Inward FDI might empower trades from domestic firm through industrial linkage or spill-over impacts

(Harrison, 1993). FDI might upgrade export-oriented efficiency that further enhances trade execution, as

discovered (O'Sullivan, 1993; Cabral, 1995; Singh and Jun, 1995) experimental that a country's introduction

toward export is the most grounded variable for clarifying why a nation draws in FDI. Awan Khan and

Zaman (2011) contemplated the relationship between the level of trade openness and FDI by took

aggregate of exports and imports to GDP and the outcome demonstrated that the level of trade openness is
profoundly substantial with a positive sign. Declining in the barriers to trade and an expansion in the

significance of systems, foreign investors discover barriers to passage and non- aggressive situations less

engaging. Recent studies has been found that foreign investment is hindered by high tariff or non-tariff

barriers on imported inputs and is pulled in to more open economies which in turns build FDI in the

country Chantasasawat, Lizaka and Siu (2010). In any case, Moota (1992) notice that a higher tax would

build the export expense of foreign firm and actuate the foreign firm changing the section mode from

export to FDI. The meaning of FDI is given to be decided of Balance of Payments of the International

Monetary Fund (1993) FDI alludes to a venture made to obtain enduring enthusiasm working outside of the

economy of the financial specialist. According to Adrian, Robert (2010), the amounts of foreign direct

investment it attracts when there has a business regulatory environment in the country. Lawless (2009)

finds that the assessment multifaceted nature parts of Doing Business significantly affect the presence of

FDI however little impact on the level.

3.0 Methodology

3.1 Research Design

Research Design of this research is descriptive as the data collected are numerical term acquired from
World Development Indicators from World Bank. Further descriptive research as to elucidate research
clarifies more on some circumstance a measure of the event or activity and it is refined by utilizing
illustrative measurement.

3.2 Research Methodology

In order to conduct this study, researcher collect the information using the quantitative research for the
data collection as the data collections are obtained from World Development Indicators (World Bank).
Subsequently the statistics researcher gotten from World Development Indicators are in numerical term, it
be suitable as the quantitative data as designated in the statement (Sukamolson, 2005 ).

3.3 Data Collection

This study is carried out by using the secondary data to identify and explain the research question and to
achieve research objective developed from the above chapter. Steward and Kamin (1993) definite
secondary data give higher-quality information to the researchers contrast with to primary data.
3.4 Population and Sampling

The population of this research data covers a year 2013 period. Data collection is evaluated with an
objective to comprehend the trend of FDI, effect then link of variables in developing countries that was
choose based on purposive sampling as only the companies with the availability of data in the recognized
indexes were been selected from the strata of developing economies.

3.5 Data Analysis Plan

This research paper is using the descriptive statistics, as the elements of statistical include mean, median
and standard deviation. Linear regression and correlation analysis also used to analyze of this research as
to see there are significant or insignificant relationship among variables.

In descriptive statistics, researcher figured mean and standard deviations values. Researcher use a sample

of 100 countries during the year 2013 period for both variables which is independent and dependent

variables as measure in current US dollars. However, one of independent variable researcher use the year

2014 period such as easiness of doing business indicators. By doing so, both variables are computed as to

predict inward FDI.

Table 1 presents the descriptive statistics for the variables used in the research does it shows the statistical
mean and standard deviation for each of variables. Over the 100 countries the highest average mean
(M=117.22) indicating the ease of doing business, followed by trade openness (M=87.13). This finding is
consistent with Lawless (2009) where they found that better business regulatory environments as defined by
ease of doing business measure, will attract more foreign direct investment.

4.3 Correlations Analysis

In the correlation analysis, export GDP is significant to the import GDP with the Pearson correlation
of 0.810 was positive with 0.000 < 0.05 at the 0.01 (2-tailed) significance level. Since Pearson’s r is positive,
we can conclude that when the amount of export GDP increases, the import GDP also increases. Similarly,
export GDP and import GDP has significant to the trade openness with the Pearson correlation of 0.954 and
0.947 respectively was positive with 0.000 < 0.05 at the 0.01 (2-tailed) significance level. We can conclude
that there is a statistically significant correlation between two variables.

4.4 Linear Regression Analysis

Model 1: Import Export Ratio + Ease of doing business + Tax rate =
Trade Openness

By taking a model summary at the table, we have seen the parts of R square and adjusted R square. Looking

at Adjusted R square which is 0.080 in percentage and it is 8% with the purpose of multiple regressions.

Hence, R square measures the extent of the aggregate variability import export ratio, ease of doing

business, tax rate of which is clarified by the trade openness' model justifiably; thus is can be say that 8% of

the aggregate variability of import export ratio, ease of doing business and tax rate is clarified by the model

of trade openness indicators in this research.

Ease of doing business with the P value (Sig) = 0.002 < 0.05, it is show that positive relationship between
variables. Ease of doing business has a great impact on trade GDP, but B coefficient not expected as a negative
sign, thus it simply mean that the value on the dependent variable has a negative impact on the independent
variable.

Model 2: Trade Openness = Foreign Direct Investment

The table 1 demonstrates the summary of the model 2 and clarifying the reliance of the model in
percentage between independent variables of trade openness which are the pointers of the foreign direct
investment. The table 1 summary in predicting the trade openness and foreign direct investment shows R is
0.420, R square is 0.176 and adjusted R square is 0.168 meaning that 16.8% of the variance in the trade
openness can be predicted by independent variable of dependent variable suggesting that the model is
good fit to predict foreign direct investment. The result of regression analysis shows that trade openness is
significant in influencing foreign direct investment with the factor significant level is 0.000 < 0.05.

Positive impact on trade GDP to FDI GDP, the P value (Sig) = 0.000 < 0.05, showed that positive relationship
between both variables. In contrast, the relationship is reliable and can be used to make predictions. Trade
openness to GDP has a great impact on FDI attraction, which confirms of study by Marson and Abdhulla
(2010) that established FDI may be attracted to countries with greater propensity to trade supported the
study of Awan, Khan and Zaman (2011).

Model 3: Ease of doing business + Trade Openness = Foreign Direct Investment

By taking a model summary at the table, we have seen the parts of R square and adjusted R square. Looking
at Adjusted R square which is 0.162 in percentage and it is 16.2% with the purpose of multiple regressions.
Hence, R square measures the extent of the aggregate variability of ease of doing business and trade
openness which is clarified by the foreign direct investment' model justifiably; thus is can be say that 16.2%
of the aggregate variability of ease of doing business and trade openness is clarified by the model of foreign
direct investment indicators in this research.