Proceedings of the 10th International RAIS Conference on Social Sciences and Humanities (RAIS 2018)

Interest Rates, Fuel Subsidies, and Investment Friendliness in Southeast Asia

Authors
Siangling Lu
Corresponding author
Siangling Lu
Keywords
Fuel Subsidies, Gross Fixed Capital Formation, Interest Rates, Investment Friendliness, Southeast Asia
Abstract
The question of investment determinants has been widely debated in the economic field, with scholars such as Daude and Stein (2007) and Waheed (2015) citing institutional quality as key while Ibrahim (2011), Jongwanich and Kohpaiboon (2008) cite financial market conditions as key. However, the role of fuel subsidies in affecting investment friendliness in smaller-scale oil producing countries have not been sufficiently addressed. My paper investigates determinants of investment friendliness in Southeast Asia with special attention to fuel subsidies. Specifically, in my project, I examined the interactions between lending interest rates, fuel subsidies, and gross fixed capital formation to carry out qualitative case studies on oil producing countries. I theorize that countries with higher fuel subsidies are likely to be less investment friendly than countries with lower fuel subsidies. This project, by closely examining fuel subsidies, sheds new light on the rarely acknowledged issue of fuel subsidies and investment friendliness.
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