This paper analyzes the factors of FDI inflows to countries in Southeast Asia over the
period 1991 to 2009. The results indicate that the market size, openness of the economy,
quality infrastructure, human capital, labor productivity are the main factors that have a
positive impact on FDI flows. Additionally, exchange rate policy, real interest rates,
political risk and institutional quality also affect FDI flows. Surprisingly, the cheap labor
does not help to attract FDI to the region, because foreign investors are particularly
interested in labor productivity. This study also showed that the Asian financial crisis in
1997 affects the amount of FDI inflows, but not on the nature of FDI inflows in the region.