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Theoretical and Applied Economics
No. 3 / 2017 (612), Autumn

What impact has free trade area on economies of ASEAN-5 countries?

Abidin ÖNCEL
Sakarya University, Sakarya, Turkey
Raisal Fahrozi LUBİS
Sakarya University, Sakarya, Turkey

Abstract. The main object of this study is to evaluate the impact of free trade liberalization on ASEAN-5 countries, consisting of Indonesia, Malaysia, The Philippines, Singapore and Thailand. Since ASEAN free trade area agreement was declared on 28 January 1992, the cooperation among the members has increased rapidly and has fostered them to achieve higher levels of economy. Therefore, variables such as foreign direct investment and trade should be implied to find out the determinants of the increase of output per capita of these countries. Panel data regression analysis has been employed in order to analyze the data. The variable of foreign direct investment has a positive effect on increasing output per capita of ASEAN-5 economies. We have also found the evidence for which the variable of trade and dummy free trade area don’t have significant effect on output per capita before the policy was totally applied (zero tariffs). However, after the policy of zero tariffs was applied, these variables proved to give significant positive effects on output per capita.

Keywords: free trade area, ASEAN, foreign direct investment, economic integration, panel data analysis.

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