FDI and regional economic integration: A case of near

NEAR (North East Asia Region) economic integration is reemerging as one of the key issues in the process of recovering from the Asian economic crisis of 1997. Talks are no longer limited to traditional free trade agreements but have expanded to the Yen Bloc, AMF,1 and even RMB bloc, which are discussed informally among academicians and politicians. This paper attempts to show that dynamic intra-regional FDI (foreign direct investment) flow driven by market forces from late 1980s already began to act as an important catalyst to foster increased intra-regional economic integration. Factor exchanges accelerated commodity exchanges due mostly to intra-regional economic dynamism since the breakdown of the Cold-War, forced industrial restructuring caused by shaping new intra-regional division of labor, and market preemption effort seeking market potential in China. This, in turn, might result in what is referred to as “natural interdependence” in the intra-regional countries. This market-driven natural interdependence has stronger probability of evolving into an institutional economic integration if the market opening and crossing FDI proceeds further.