A MODEL OF FUEL AND ENERGY SECTOR CONTRIBUTION TO ECONOMIC GROWTH

Aleksandra G Polyakova,Vladimir V Kolmakov,Seeram A Ramakrishna,Dmitry V Zavyalov

doi:10.32479/ijeep.7849

Abstract

The study examined the impact of foreign direct investment (FDI) in the fuel and energy sector and related industries on economic growth in response to the debates on FDI’s impact on economic growth being positive (government officials and policymakers) or negative (the World Bank, some researchers). The hypothesis that a significant relationship is present between the Russian Federation GDP and gross FDI in Fuel and Energy Sector (fuels and non-fuels fossils mining, coke and petrochemicals production, rubber and plastic production, and energy supply) is introduced and validated by using a regression model. The derived model tests changes of regression results patterns of the Russian GDP against FDI in energy-related industries in different periods 1998-2004 and 2010-2017. GDP is assessed in five different measures: current US dollars, international US dollars (purchasing power parity), growth rates of the former and the latter, and physical growth index. It was concluded that, to a greater extent, economic growth is influenced by foreign investment in energy supply and petrochemical production in the both periods. Increased investment in power generation also contributes to economic growth, while other constituents of the sector, including mining, have a statistically insignificant or even retarding effect on economic growth, thus evidencing in favor of the World Bank’s criticism towards FDI. Policy implications of the findings prove the necessity to introduce structural changes intended to redirect capital flows from oil and gas to prevent from economic growth deterioration in the long-term perspective. Keywords : Economic growth; Foreign Direct Investment; Fuel and energy sector JEL Classifications: C3, O4, Q43 DOI: https://doi.org/10.32479/ijeep.7849

Highlights

Economic growth is an important characteristic of the economic system and is derived from many factors
The low share of foreign investments in the total volume of investment may indicate the orientation of the investment programs of companies to solve current problems or a country’s investment climate unattractiveness even in those types of economic activity that traditionally are in high demand
The inflow of foreign investment is a factor that contributes to the competitiveness and economic growth of countries, since foreign capital can compensate for the relative lack of domestic resources and ensure the growth of investment activity

Summary

INTRODUCTION

Economic growth is an important characteristic of the economic system and is derived from many factors. Et al A Model of Fuel and Energy Sector Contribution to Economic Growth technological solutions and modern business standards, which provides an increase in the competitiveness of both individual subjects and the country’s economy as a whole. FDI risks, described in the literature review have to be considered regarding the World Bank’s criticism consistent in cost-benefit misbalance, exploitation malpractices, environmental pressure and transfer of productivity gains abroad. All the latter need to be well-balanced and, estimated in terms of current and potential influence on economic growth. The paper aims to get a proof for the axiomatically taken idea that the Russian fuel and energy sector driven by foreign investment can facilitate the economic growth

LITERATURE REVIEW

DATA AND METHODOLOGY

RESULTS AND ANALYSIS

CONCLUSION