Determinants of Private Investment in Sri Lanka

During the late 1970s and early 1980s, many African countries experienced a profound slowdown in economic growth. The growth rate of real per capita GDP fell from 0.4% per year during the 1973-80 period to 1.2% per year during the 1980-89 period.' The causes-internal and external-of Africa's economic decline and the strategies for restoring economic growth are much debated. Nevertheless, broad consensus has emerged on the importance of (i) increasing total investment and (ii) promoting private-sector development and increasing its share of total investment for long-term growth.2 It is widely recognized that gross domestic investment fell substantially in Africa during the 1980s and remains severely depressed across the region. The proportion of total domestic investment in GDP fell from 20.8% per year during 1973-80 to 16.1% per year during 1980-89. In some countries, investment has fallen to less than 10% of GDP-a level that is insufficient even to replace depreciated capital. In Africa, the minimum investment needed to replace depreciated capital is estimated at 13% of GDP.3 In recent years, there has also been a growing recognition among many African leaders, faced with new realism and pragmatism, that the private sector could play a significant role in economic development. The focus in the longer term of structural adjustment programs and sectoral reforms adopted by these countries is on creating more appropriate incentives and a framework for private-sector development as the basis for achieving sustainable economic growth. In addition, multilateral and bilateral institutions have developed new initiatives with priorities for private-sector development. In 1989, the International Finance Corporation, an affiliate of the World Bank, es-

This study examines the dynamic effects of public and private investments on India’s economic growth, focusing on disaggregating public sector investments into infrastructure and non-infrastructure Gross Fixed Capital Formation (GFCF). Key questions include: How do public infrastructure and non-infrastructure investments impact economic and private sector growth? What roles do Foreign Direct Investment (FDI), labour force participation, and the real interest rate play in shaping economic growth? The study uses the Autoregressive Distributed Lag (ARDL) model to analyze 40 years of macroeconomic data from 1980–81–2019–2020, offering insights into both short- and long-term effects. Findings reveal a crowding-out effect of public infrastructure investment on private investment in the short term but a crowding-in effect in the long run. FDI, labour participation, and the real interest rate significantly influence GDP growth, confirming their roles as critical drivers of economic expansion. Disaggregating public investments shows infrastructure and non-infrastructure investments play distinct roles in shaping economic outcomes. This study contributes by addressing the gap in understanding how different types of public investments affect private sector activity in India and broadens investment analysis by incorporating FDI, labour participation, and the real rate of interest, offering new evidence for research and policy formulation.

The private sector is crucial for economic growth, encouraging investment, innovation, and jobs, especially in developing nations. Using the Autoregressive Distributed Lag (ARDL) bounds testing approach for short-run and long-run dynamics, this study investigates the impact of private sector investment on the economic growth of Pakistan over the designated period 1990 to 2024. Explanatory variables used in the study are private investment for the private sector, public investment, foreign direct investment, inflation, interest rate, institutional quality, and technological innovation. The long-run empirical results show that private investment, public investment, FDI, technology, trade openness, and institutional quality have a strong positive effect, whereas interest rate has a negative impact on economic growth. In the short run, also, Private investment, FDI, Government expenditure, and quality of institutions are significant determinants of growth. The ECM here is statistically significant with a negative sign, which confirms the adjustment to the long-run stable equilibrium. The study also indicates that strengthening the private sector, improving the institutional governance, and investing in innovation are all very critical for the sustainable growth of the economy of Pakistan. The paper culminates in policy recommendations for a more balanced and inclusive development strategy.

Abstract. Private and public investment has own contribution to the growth process of an economy. Private investment is very crucial for economic growth and poverty reduction. Whereas, public investment contributes positively to economic growth through enhancing the productivity of private investment ( Ang, 2009 ). Various empirical studies in developing countries showed that economies led by the private sector achieved better economic performance than the one led by the state. Pakistan has a very sluggish growth in private sector which is a major cause of slow economic growth in the country. So, it is very important to explore the factors which can stimulate the private sector investment in Pakistan. Therefore, this research is designed to find out major non economic determinants which can stimulate or hinder the private investment in Pakistan. Studies on non economic determinants are not sufficient in Pakistan so this study will fill the Gap. In this study for estimation, ARDL approach was applied on time series secondary data (i.e. from 1969 to 2016). The empirical evidence confirms that there exists a long run relationship exist between dependent and independent variables in the model. Furthermore, in the long run, corruption, political instability and violence have significantly negative impact on private investment. Results also suggested that in the short run, the disequilibrium is rapidly adjusted. Based on study results, it is recommended that policy makers develop more effective policies of good governance to improve the private investment. Keywords. Private investment, Corruption, Political instability, Violence, Time series data, Pakistan. JEL. D72, D73, E20, E22.

The UN World Water Development Report 2016, <i>Water and Jobs</i>: A Critical Review

This study investigates the effect of public debt on private investment in Kenya using a causal effect research design of time series data of 43 years (1978 — 2020). Private investment plays a crucial role in economic growth by fostering employment, capital accumulation, and technological advancement. Private investment is extremely important to growth, development, and employment. Excessive borrowing, however, results in debt accumulation which retards the pace of sustainable economic progress. Kenya is one of the most highly indebted countries in Africa. Statistical software SPSS and E-Views packages were used for data analysis. As a result, based on an error correction model, external debt, internal debt, and debt interest rates have a statistically significant negative effect on private investment. Concretely, every additional unit of external debt induces a decrease of 0.012410 units in private investment, and every additional unit of internal debt leads to a reduction in private investment by 0.057316 units. Also, debt interest has a negative effect on private investment, whose impact is 0.010017. The results of this study indicate that excessive public debt crowds out private investment by raising its liability for interest and diminishing funds available for the private sector. The results indicate that in Kenya, rising public debt has been detrimental to private investment and that there is a need for prudent borrowing and sound fiscal policies. To cushion the effects of these conditions, the government should focus on debt sustainability, expand the tax base and encourage fast growth of the private sector through the promulgation of favorable policies and provision of investment incentives. Investor confidence and long-term economic stability will be strengthened through mechanisms for strengthening institutional frameworks and fiscal transparency. Transparency in fiscal policies and improving the outlook of institutional aspects will increase investor confidence as well as growth. With this recommendation in place, Kenya will balance their debt with the need for investment in the private sector hence balancing economic growth and development.

This paper analyses the determinants and the relationship between foreign direct investment (FDI) and economic growth of Bangladesh. The study uses panel data analysis over the period from 2004 to 2013 to test the hypotheses. The study employs an OLS method for the analysis, and to determine the macroeconomic variables that influence FDI inflow in Bangladesh for the sample period. We find evidence that inbound FDI is positively correlated with the gross capital formation, imports of goods and political stability. This finding suggests that FDI inflow is directly related to the political stability of Bangladesh and, gross capital formation and imports increases during the stable political situation. Further, we also find evidence that corruption rate, good governance and unemployment rate are negatively correlated with the inbound FDI. This finding provides evidence that higher corruption rate and the unemployment rate are bad for the macroeconomic development and provide a negative signal to foreign investors. Our research is aligned with the previous research finding. Our research findings have implications for the government of Bangladesh to stabilize the political situation and standardize the inflation rate so that the FDI inflows enhance and influence the economic growth.

The paper aims to examine empirically the nexus between foreign direct investment, domestic investments and economic growth in Pakistan by using time series data. An OLS technique is used to analyze the relationship between FDI, Public &amp; Private investment, Personal remittances with gross domestic products panning from 1976-2016. For a data to be stationary, ADF test has been used and validated that all variables are stationary at level. Results of the study shows that both public and private sector investment are positively related with GDP but Public sector investment have an insignificant effect on GDP, while FDI found inversely and insignificantly correlated with GDP. Personal remittances (PR) relate negatively and have a significant impact on GD. Private investment are found to be the most significant variable which can effect GDP, showing that private investment can fueled economic growth of Pakistan. Hence, the Government of Pakistan needs to formulate such a policy frame work, which focuses on private sector investment in order to enhance economic growth.

The Overseas Private Investment Corporation (OPIC), an American government agency that promotes private investment in developing nations, has been a contested agency since its inception. Critics contend that it subsidizes big business, distorts market signals, and supports projects that have a detrimental effect on local communities. Its supporters argue that it is central to the U.S. foreign developmentassistance strategy. In this article, I analyze the historical debate over its role and show how systemic and domestic pressures triggered adjustments in its activities that enabled its survival. I illustrate these adjustments with an analysis of its role in sub-Saharan Africa that draws out both the promotion of U.S. economic interests and the evolution of progressive governance guidelines that increase its chances of promoting sustainable development. Promotion of private investment has always been a component of the United States economic development policy toward sub-Saharan Africa. Historically, the central institutional actor in investment promotion in developing countries has been the Overseas Private Investment Corporation (OPIC), an independent agency established in 1969 and in operation by 1971, to assist, finance, and insure private American investors in developing nations. OPIC was designed to stimulate private investment in risky economic environments where private insurance is unavailable. Its supporters argue that this is crucial to the encouragement of economic development in the poorest regions of the world. According to OPIC’s development guidebook, Foreign Direct Investment (FDI) can provide these benefits to society: “technology transfer, human capital formation, international trade integration, a more competitive business environment, enterprise development.” OPIC acknowledges that research on the link between FDI and economic growth is limited; however, its position is that FDI is most likely to contribute to economic growth when there is a private sector with rule of law that enables the

This study examines the impact of private investment on economic performance in Nigeria using time series data from 1980 -2018. Multiple regression and co-integration methods are employed to analyze the data. The objectives of this study is to, among other things, examine the casual relationship between private investment and economic growth in Nigeria and to investigate the impact of private domestic investment on economic performance in Nigeria. Being a time series data, the first step is to test for the stationarity of the data by using Phillips Perron-Fuller unit root test. Ordinary least square (OLS) and Auto regressive distributed lag (ARDL) technique is used to estimate the models. The results of the unit root test show that some variables; Labour Force Participation rate (LPR), Private Domestic Investment (PDI),Foreign Direct investment (FDI), Misery Rate (MR), Private Investment (PI), Exchange Rate (EXR), Unemployment Rate (UNEM) and Trade Openness (TOP) are integrated of order one (1) while two variables; Real Gross Domestic Product Growth Rate (RGDPR) and Real Interest Rate ( RINTR) are integrated of order zero (0). The findings from the analysis using the Ordinary Least Square (OLS) and Auto Regressive Distributed Lag (ARDL) methods show the following: that there is no causal relationship between private investment and economic performance in Nigeria. Private Domestic Investment (PDI) recorded a positive but insignificant impact on economic performance (RGDPR) both in the short run and long run; unemployment rate reveal a negative but insignificant impact on economic performance (RGDPR) in the short run but the impact is statistically significant in the long run. There is no long run significant impact of Foreign Direct Investment (FDI) on economic performance in Nigeria, Trade Openness showed a significant inverse relationship with Misery Rate which was proxy for economic performance. The co-integration tests also confirm the existence of long run relationship between the variables and results gotten from stationarity and normality test reveal that the model is fairly well specified and could be used for policy analysis. Based on these findings, the study recommends that the AKSU Journal of Social Sciences (AJSS) Vol. 3, No. 1 (April) 2023 – G. M. Ekpo, E. B. Iwatt &amp; A. A. Uduimoh, pp. 55-85 58 Nigerian government should promote and encourage both domestic and foreign direct investment. The investment policy should be more transparent, attractive and competitive.

The paper investigates the relationship between government and private investment with a view to ascertaining their complementarity or substitutability in driving economic growth in Nigeria for the period of 1981-2021. To achieve the objective, nonlinear autoregressive distributed lags (ARDL) models and nonlinear Granger causality tests were employed to analyze annual secondary data which were sourced from the Central Bank of Nigeria Statistical Bulletin. Findings show that government investment expenditure displayed a positive and long-term influence on private investment, suggesting a “crowding-in” effect where increased public investment stimulates private investment thereby fostering overall economic growth. Economic adversities or reduced public investment exerted a substantial negative impact on private investment, underscoring the complementarity of government investment expenditure in driving economic growth in Nigeria. Also, the nonlinear Granger causality tests reveal unidirectional relationship as government investment expenditure causes private investment across various embedding dimensions, emphasizing the positive influence of government investment on private investment. The findings generally suggest the need for balanced fiscal policies, prioritizing productive government investments, encouraging private investment, controlling inflation, and making time-sensitive policy decisions to promote economic growth in Nigeria.

It is widely recognized that trade and foreign direct investment (FDI) inflows are important factors in long-term economic growth. Trade openness enhances skills through the adoption of imported superior production technology and innovative processes, and thus exerts a positive and significant impact on economic growth. Similarly, FDI augments and stimulates domestic investment, enhances technology transfer, increases export capacity and foreign exchange earnings, and thus promotes capital formation and long-run growth. This paper examined the empirical relationship between economic growth on one hand and trade and FDI flows on the other hand for Saudi Arabia during the last four decades (1970-2010). The autoregressive distributed lag (ARDL) methods to cointegration and the associated error correction model (ECM) are adopted. The results suggest that human capital, government expenditure, trade openness and infrastructure are important determinants of long run growth in Saudi Arabia. In contrast, FDI together with domestic private investment has impacted negatively on real gross domestic product (GDP). This is attributed partly to the dominant role of the public sector in the economy emanating from the huge oil resources, thereby leaving little room for the domestic and foreign private investment to play their role in the economy, and partly to the concentration of FDI in unproductive sectors. Nonetheless, the interaction of FDI either with government expenditure or with domestic investment could impact positively on growth. Efforts should therefore focus on enhancing the integration between these factors on long-term growth. Privatization, economic liberalization, and diversification measures are expected to provide real opportunities for domestic and foreign investment to play an important role in economic activity and growth. Key words: Saudi Arabia, FDI, unit roots, ARDL cointegration, ECM, trade.

In view of a macroeconomic context characterized by the revival of economic growth and the vision of having a better Togo in 2030, we have witnessed in recent years a major campaign to promote both domestic and foreign direct investment. Given the theoretical ambiguity of the relationship between these different types of investments, we offer in this paper an empirical validation of the interactions within the triptych FDI - public investment - domestic private investment. Estimates using a VECM showed that long-run private investment has a ripple effect on both foreign direct investment and public investment, which conversely also have a positive influence on domestic private investment. In addition, there is no significant relationship between public investment and FDI. Regarding the short term, there is a training of public investment in the previous period effect on FDI while domestic private investment tends to oust. Finally, an increase in FDI stimulates in the short term, both public and domestic private investment. Key words: Foreign direct investment, public investment, private investment, VECM, Togo.

This research studied 51 years of historical secondary data ranging from 1972 to 2023 to ascertain how foreign loans (FL), inflation rate (INF), and foreign direct investment (FDI) impact the gross domestic product (GDP) and gross national income (GNI) of Bangladesh, an emerging market economy. The study compiled secondary data from multiple sources, such as the World Bank, Bangladesh Bank, macrotrends.net, Bangladesh Economic Review, and Bangladesh Bureau of Statistics. It used the multiple linear regression model to assess the impact of FL, INF, and FDI on economic growth. The study results revealed that FL and FDI significantly impact economic growth. It implies that growing FL and FDI can boost the economic growth of an emerging market. It also indicates that external financial flows can significantly strengthen the macroeconomic fundamentals of a country and contribute to inclusive development if appropriately used. Therefore, Bangladesh should maximize the appropriate use of FL and FDI for high-impact projects and create a more suitable setting for FDI through regulatory reform and incentives. It would safeguard macroeconomic stability through integrated fiscal and economic policies, encourage public-private partnerships to get leverage from the use of technical know-how, and enhance sector-specific research to foster sustainable growth. Future studies could build on this work, examining other economic factors such as interest rates, domestic debt, remittances, public and private investment, policy reforms, and governance. In addition, further comparative studies with other emerging countries could be done to gain an inclusive insight into the influence of FL and FDI on economic growth.

Reported in this article is the empirical effect of deposit money banks’ credits on Nigeria’s private sector’s investments. The study was evaluated empirically over a period of forty-one years, from 1981 to 2021. Deposit money banks’ credits is proxied by bank credits, with interest rate and money supply moderating regressors while private sector investments is measured as private investments. Utilized for analysis are sourced secondary data from the Central Bank of Nigeria statistical bulletin and the applied methods of analysis include descriptive statistic technique, Augmented Dickey-Fuller’s Unit Root test, Auto regressive Distributed Lag technique. The findings obtained showed clearly that private investments and banks’ credits were stable at levels, as cost of credit (interest rate) and money (liquidity) supply were stationary at first difference. In addition, banks’ credits had direct and significant effects on the regress and (private investments) in Nigeria, cost of credit had negative but significant bearing on private investments while money supply had positive and significant effects the independent variable. Lastly, there exists long-run equilibrium rapport among private investment, banks’ credits, interest (credit) rate and money supply at 5 percent critical level. Sequel to these findings, it is therefore concluded that deposit money banks’ credits had significant-positive effects on private sector investments in Nigeria in both short run and long run. It is thus, recommended among others that deposit money banks need encouragement to expand credit extensions to private sector operators for sustainable enhancement of investments in this sector of the economy.