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There is a strong yet complex relationship that exists between FDI and
trade. The convolution has lead to the formation and creation of a plethora
of theories that have attempted to investigate and envision the kind of
relationship that subsists. They rela te to-

y Œhether these flows are complements or substitutes

º Ñorizontal FDI, a substitution relationship, the (Multinational
Enterprise) MNE produces the good locally instead of exporting it
from the home country
º [ertical FDI, a complimentary relationship, no substitutes;
instead demand for intermediate goods from the MNE affiliate
can result in an increase in exports to the host country
y The equalization of capital endowments removes the basis for trade
y  onditions such as external economies of scale  and different
production technologies can function as a basis for trade .
y ·eneral equilibrium based on differences in factor endowments.

The most recent development in the theories of trade and FDI which adds
realism uses the combination of horizontal and vertical FD Is which relies
heavily on the export to third markets and not in the parent or host country
market.

Light has also been thrown on the various empirical research of FDI and
trade that relies heavily on FDI generated by developed economies . They find
that higher MNE affiliate sales in the host country were linked to higher
exports from the MNE parent, that is, foreign production does not substitute
for exports.

Through the analysis and evaluation of various studies and research papers,
this article provides a contribution by providing a study that includes an
analysis of the link between FDI inflows and host country exports on the
aggregate level for a group of East Asian economies. The author rallies the
importance of international trade that is pivotal for economic development
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through currency exchange and other monetary and non -monetary
incentives.

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For centuries, the East Asian economies have been the epicentre for trade
and has now emerged as the major force the is driving the global traffic. The
alluring reason that makes East Asia the centre for trade is the e xistence of
champions like  hina and Korea. The immense potential that these
countries have to offer is what attracts many investors from the Œest. Of the
many, some of the contributing factors to this trade boom are ²

 ·overnment policies
 Openness to trade and FDI
 Focus on exports

The growth rates achieved by countries in this part of the world are
skyrocketing and continue to do so and this has forced the world to be in
awe of them.  ountries like Ñong Kong and Singapore are being included in
the high-income group which is phenomenal considering the challenges that
they had to counter. The numbers speak for themselves and is indicative of
the fact that East Asia is becoming a chosen destination for exporters and
importers alike for conducting trade. In a nutshell, East Asian markets are
emerging as a hub for global trade and trade relations. The quarterly data
from UN TAD shows that East Asia and South East Asia is a gold mine, an
investment haven. Investments in 2009 in these countries were a whopping
$233 billion.

The numbers that have been registered in these economies are jaw -
dropping. Per capita FDI investments are high in countries like Singapore
and Ñong Kong. Outward stock per capita is higher in these countries as
well. Œhat is driving these economies to come out with flying colours?
Answer is Foreign Direct Investments!  learly enough, FDI has turned out to
be important for East Asian countries. Although the article fails to draw a
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clear cut relationship between FDI and exports, and the data analysis
provides a vague idea on the same, there is nothing taking away from the
fact that FDIs have had a major role to play in the structuring and castling
of these economies .

The article throws light on the actuality that FDI in East Asian countries
have contributed to increase in inco me levels. These Dark horses have
proved their metal in gold with the fiscal helping hands of multinational
enterprises that have identified them as investment asylums . The
investments relationships have indeed proved to be a major contributor for
the triumph of these Asian economies and this persistence is essential for
their development.