This dissertation questions the role and policy functions of local content requirements(LCR) in the FDI in the automotive industry and how it should be regulated
in the international forum governing multilateral trade and economic affairs. Among
many factors influencing the FDI inflow to the country, what would be the most important
factors, and will LCR of the host country deter inward foreign investment? Further, does
the LCR help industrial development of host country pursuant to its policy goal? To give answers to these questions, the dissertation analyzes FDI’s determinants in the automotive industry, and the impact of LCR on the industrial development in the host country. Finally, it attempts to give implications and suggestions for the national policy makers and also for the delegations for future multilateral investment treaty. We first question the
logic of current WTO rule that prohibits LCR alleging its trade and investment distorting
effect. Then, it suggests how investment should be regulated in the multilateral system
without prejudice to the development of industry in the less developed countries.
There have been many researches on the FDI theories and determinants, but in this dissertation we focused on the industry specific elements, namely automotive industry.
From the empirical work covering 42 automobile producing countries, we found that generally market size or demand force was the foremost FDI determinant in the automotive industry, although different patterns of FDI were witnessed across regions.
Also, LCR’s linkages effect with local industry and spillovers to the productivity enhancement was demonstrated through panel data analysis. Thus, confirming the
economic role and benefits of LCR to the host country, and limitations of the current
framework disparaging its contribution for development, it concludes that LCR needs to be
regulated in other multilateral venue. Here, multilateral investment treaty is suggested as
an alternative to the WTO system, although it would be tough and challenging task for the global community.
FDI, indigenization policy, and development
Case of automotive industry
[Seoul]:KDI School of Public Policy and Management
|Subject Country||South Korea(Asia and Pacific)|
|Subject||Economy < Direct Investment
Industry and Technology < General
|Holding||KDI School of Public Policy and Management|