Through out 1997, East Asia's unfolding financial crisis threw doubt on critiques of the role of foreign investors in the region's downward spiral. It is still fresh memory that the foreign investment has played the crucial role in the East Asian economic miracle. As long as the economic turmoil exacerbating, more and more debates are generated on foreign investment.

Before rushing to judgment, it is necessary to identify foreign direct investment (FDI) from variable forms of foreign equity. Typically, FDI is put by multinational corporations that consciously combine equity ownership with managerial control. In addition, different forms of foreign investments respond differently to East Asia's ever-changing opportunities and risks. Since FDI often facilitates the cross-border transfer of foreign technology as well as better access to foreign markets, it has more reliable and credible responsibility for eliminating the Asian crisis and accelerating the growth.

The external financing of East Asia's five most afflicted economies: Indonesia, Korea, Malaysia, the Philippines, and Thailand illustrates foreign investors' varied responses to the financial crises. See Table 1.

It can be learned from the table the pattern changed dramatically during 1997. FDI and nonbank credit quickly became the only remaining private sources of foreign investment in all five economies. To finance these new foreign investment outflows as well as ongoing current account deficits, the five countries had to turn to official and multilateral sources of external financing. Hence, it is unavoidable for competition for FDI among these governments.

Aiming to increase exports for recovery, export-oriented projects become the central part of competition. FDI has thus merged as an important source of foreign exchange for crisis-afflicted economies not only one their capital account, but also on their current account through export.

The role of FDI varies widely across the region's economies and industries. Most of it is concentrated in manufacturing, where government competition is most intense. Although FDI has long been severely restricted by capital controls that largely relegated foreign investors to niche markets, these controls have less limitation on cross-border transfers of foreign technology in financial services.

More and more FDI is needed to rehabilitate the Asia crises, the issue where do the governments find the sources rises? As the economic giant in Asia, Japan has used to be Asia's largest source FDI. However, the popping of Japan's bubble economy early in the decade combined with subsequent recessions, Japan started limiting the value of fresh outflows. Meanwhile, Korea, Singapore, and Taiwan are the next largest sources of FDI. Even those countries have been largely spared the current crises, may still see the relative importance as Asian sources of intra-regional FDI grow.

The Mainland China, as the biggest growing country, is concentrated to accumulate FDI. The destination of two-fifths of FDI flowing into Asia is China. Since the Chinese government holds a stable policy of fixed-rate currency - Renminbi,the most efficient way which is devaluing currencies to boost exports from existing producers, as well as attract new investment from prospective producers can't be applied. The raising pressure on Chinese policy-makers to respond by devaluing is more and more intense.

Because China and other East Asia economies are increasingly integrated, not so much through trade but through FDI and other capital flows, government policies and corporate strategies in one economy inevitably shape to be similar. Such similarity, an intra-Asian FDI contributes to a larger contagion effect threatening to spread financial crises across the region.

Fortunately, the United States runs a smaller risks of importing Asia's financial contagion through FDI. Outside of Japan, Asia has typically accounted for only 10 percent both of the cumulative stocks of U. S. FDI abroad and annual U. S. FDI outflows. However, this time the Asian financial crises did increase both the importance of East Asia to American multinationals and the relative importance of U. S. FDI to that region's economies. There are huge opportunities for these robust companies to exploit. If under the proper strategy leading, such U. S. FDI is likely to figure prominently in the future growth and structural adjustment of a growing number of Asian economies.

Generally speaking, the recovery of East Asia Crises can't be processing smoothly without health FDI.