FDI Attraction Research Articles

FACTORS OF INFLUENCE ON FOREIGN INVESTMENT IN THE ECONOMY OF UKRAINE: APPROACHES TO CLASSIFICATION

The publication deals with the issue of classification of factors influencing foreign direct investments. The purpose of the study is to develop a classification of factors and to determine the main factors influencing foreign investments in the economy of Ukraine. The paper contains an overview of studies of significant factors influencing the attraction of foreign direct investments in Ukraine and considers approaches to the classification of factors influencing foreign investments. A detailed analysis of scientists’ approaches to the classification of the factors influencing foreign investments is presented. A review of studies of significant factors influencing the attraction of FDI in Ukraine has shown that the most popular approach to classification is the division of all factors influencing the level of foreign investments demand in any country, on macro- and microeconomic ones. At the same time, macroeconomic factors in turn are detailed by the state and region levels and by the spheres of the economy. It is determined that among the authors there is no unity of views on the classification of factors. Some classifications are narrowly focused. Existing classifications of the factors do not always take into account the processes that cannot be quantified and that are important for foreign investment decision-making. In particular, these include person’s subjective attitude as one of the components of the investment process. Thus, it is necessary to include psychological factors as elements of behavioral economics. Some studies include such factors in the classification, but do not indicate the way of their measuring. Generalization of approaches to the classification of the factors showed that the determining factors for foreign capital attracting to Ukraine remain resource ones and the pace of economic development (as basic economic ones), as well as political, administrative and to a lesser extent financial factors that are specific for Ukraine. The author proposes a new approach to the classification of factors, which unlike others, divides the possible factors in terms of content into three groups: economic, organizational and psychological. There is also an additional "measurement" feature, which allows to divide the factors of each group into qualitative and quantitative ones, which is important for studying their impact using modelling. Further research presupposes dividing the shown factors on the basis of measurement on quantitative and qualitative ones.

Ways of economic development of the agroindustrial complex of the South federal district

The article pays attention to the assessment and development directions of the economic development path of the agro-industrial complex of the Southern Federal District. It was found that the most realistic prospects for the recovery of the domestic economy, with existing opportunities, are largely associated with the active development of import substitution, primarily due to the attraction of FDI. The main task of the Russian Federation is to increase income from the export of agricultural products. This is due to the fact that in the Southern Federal District they produce a large share of agricultural products, in addition, the Kuban and the Rostov Region have exits to the Black and Azov Seas (the main example is the Novorossiysk commercial sea port), all the main flows of cargo go through their ports today. Export shipments are growing annually. The author proposes that in order to strengthen economic security and ensure the sustainable development of the Southern Federal District in the face of economic sanctions, the economic system management bodies require a combination of centralized and decentralized approaches to economic formation, ensuring economic security and improving international competitiveness.

Bibliometric review on FDI attractiveness factors

Bibliometric review on FDI attractiveness factors

Determinants of FDI attractiveness: Evidence from ASEAN-7 countries

The article examines the impact of tax burden, institutional quality, and some macroeconomic determinants on attracting inflows of FDI in ASEAN-7. We estimate the panel data sample with pooling, a seemingly unrelated regression (SUR), and fixed-effects models. The empirical results indicate that economic growth, tax burden, quality of economic institution, and inflation are key drivers that significantly attract FDI while population growth and quality of political institution are negatively associated with FDI inflow. These findings may connect to the price transferring and demand-following hypothesis. Our results provide some important implications for policy-makers in ASEAN developing countries that are enhancing FDI inflow in the future.

Public investment versus government consumption: how FDI shocks shape the composition of subnational spending in Mexico

During the 1990s, many developing countries underwent simultaneous processes of global economic integration and decentralization. As a result, subnational governments became increasingly important actors in the international economy, including through policies to secure investments from multinational corporations (MNCs). These efforts have the potential to affect the management of public resources at the subnational level. Breaking from the literature's focus on fiscal incentives, we highlight how “active” foreign investment incentives—including commitments to build new infrastructure and develop worker training programs—have shaped subnational public finances in Mexico. We demonstrate that FDI attraction affected how subnational governments exercised their growing policy authority and fiscal resources. Based on panel data from Mexican states between 1998 and 2017, we find that FDI shocks are associated with statistically and economically significant increases in public investment by state governments, and decreases in public sector consumption of goods and non-personnel services. A case study of a representative investment project in Puebla highlights the importance of active investment incentives as a causal mechanism linking FDI attraction and subnational spending outcomes. Our results illustrate how FDI attraction can affect the distribution of subnational public spending and also develop a theoretically-relevant distinction between passive and active investment incentives.

THE DETERMINANTS OF FOREIGN DIRECT INVESTMENT IN THE GREEK REGIONS

This study investigates the determinants of FDI in the Greek regions. The aim of the study is to understand whether and to what extent the presence of localization economies in the Greek regions, has an impact on FDI locational decisions. We use a pooled cross-section dataset of FDI stock and we study the effect of localization economies and of other basic determinants, on the attraction of FDI. We find the most significant influences to be market size, human capital, geographic position and the presence of localization economies.

A Quantitative Look at the Relationship between FDI Inflow and Economic Growth in North Macedonia, 2006-2018

Beginning in 2006, the North Macedonian government pursued a strategy for attracting foreign investment to the country to develop it economically. In theory, FDI inflow should have this effect in a developing country mainly by contributing to productivity spillovers to domestic firms and knowledge spillovers to the domestic labor force. The goal of the research was to determine what statistical association might exist between FDI inflow and economic growth in North Macedonia, to determine if the policy of FDI attraction was having one of its desired effects. The paper fleshes out the economic growth function Y=F(K, H, L, A); growth is a function of capital, human capital, labor, and technology to determine which variables to utilize. It was found that neither FDI inflow nor any of the other considered factors for economic growth had a significant association with growth. However, taken together, all these factors did a moderately good job of explaining the variation in economic growth over the considered period. Thus, arguments for FDI inflow’s being a silver bullet for economic growth may be misplaced, as many other factors matter as well. This does not suggest that foreign direct investment ought not to be used as an economic development tool, however, as it may be having effects that are not captured by changes in economic growth.

베트남의 해외직접투자 유치와 경제발전: 투자발전경로 이론의 적용과 검증

This study applies investment development path theory to a recent successful FDI attraction case of Vietnam. The fixed effect panal data estimations for a total of 20 sample countries including Vietnam were applied initially and further for a subset of 11 Asian countries. In the regression of net outward investment(NOI) for the sample period of 2000 to 2018 on the level of economic development as proxied b y GDP per capita and t he s quared G DP p er c apita, t he i nvestment development path t heory was generally confirmed. Significant country specific effects were found especially in the analysis for the subset of 11 Asian countries in the panel regression analysis.

Does foreign direct investment influence manufacturing sector growth in Middle East and North African region?

PurposeThis study empirically assessed the influence of foreign direct investment on the manufacturing sector growth in the Middle East and North African region using panel data of 18 countries covering the period of 1975–2017.Design/methodology/approachThe study employed Levin et al. (2002) test (LLC) and Im et al. (2003) panel unit root test. Furthermore, Kao’s cointegration test was applied to examine the long-run relationship between the variables. Both the Dynamic OLS and Fully modified OLS were used in estimating the short-run relationship.FindingsThe results of the DOLS and FMOLS indicate that both inward and outward FDI influence the manufacturing sector growth positively. This shows that much of the manufacturing sector growth in the MENA region is driven by both inward and outward FDI. Our findings made a strong new proposition that aside from the negative influence proposed by Stevens and Lipsey (1992), outward FDI could also have a positive influence on the manufacturing sector of a country through effective utilization of domestic raw materials that are produced locally for production of goods in a foreign country.Practical implicationsMENA countries should concentrate more on making policies that will encourage the effective utilization of domestic resources for outward foreign direct investment in other countries of the world as it has the capacity to boost the manufacturing sector growth. Also, policies that will attract more inflows of FDI in the region should be encouraged. Both inward and outward FDI should be considered as an integral part of MENA economic policy in order to spur the manufacturing sector growth.Originality/valuePrevious empirical studies on the relationship between FDI and manufacturing sector growth have focused much on the influence of inward FDI. Thus, very little attention has been paid to the contribution that the outward FDI makes to the growth of the manufacturing sector of the host country. Our empirical study focused on the influence of both inward and outward FDI on the manufacturing sector growth with specific emphasis on the MENA region that remains the center of attraction of inward FDI and a source of inward FDI to most nonoil producing developing and developed countries given the oil-rich nature of the region.

The influence of FDI on sustainable economic development of Ukraine in terms of global digitization

This article is a research study of the role and necessity of digital transformation of Ukrainian economy in the context of digitization of the world economy, which will promote economic growth and increase the international competitiveness of national economy, which in its turn will contribute to the further formation of an attractive investment environment. The modern tendencies of information economy development are disclosed. Changes of the determinants of FDI in the Ukrainian economy in terms of its digital transformation are revealed. It is proved that foreign trade and the globalization index of the country influence on the process of attracting FDI. Much attention in the article is paid to the role of information, development of information sphere, digitization, formation of a new information economy, foreign direct investments, which are necessary for the economic development of the country and affect economic growth in the context of global digitization. The necessity of this study is due to the modern trends of development in the world economy and the digital transformation of the national economy. The role and importance of foreign direct investments in the digital transformation of the national economy has been proved on the basis of a broad analysis of research works of foreign and national specialists, analysis of economic situation in Ukraine and the main macroeconomic indicators identified the role and necessity of transformation processes, macroeconomic indicators of economic development of the country were analyzed, the necessity and requirements for the formation of an attractive investment environment, favorable investment climate and business environment have been identified. Using the econometric model, based on E-Views software, the indicators of GDP, foreign trade, inflation, employment level and the globalization index have been analyzed in the context of their impact on the volume of FDI attraction and their forecasting have been made.

Impact of Economic Freedom and Corruption Perceptions Index on Foreign Direct Investment in Vietnam

Foreign direct investment is an important source of investment capital that is indispensable to contribute to each country's total investment capital. FDI attraction has always been of special interest to governments in both developed and developing countries. The empirical method was employed on a secondary time series data set during the period 1999-2018 to determine the impact of economic freedom index and corruption perceptions index on foreign direct investment in Vietnam by using the linear approach. The empirical results show that the relationship between corruption perceptions index and foreign direct investment is a positive sign at a 1% significant level. The effect of economic freedom index on foreign direct investment has a positive effect at a 5% significant level.

The Role of Accountability towards FDI Attractiveness Evidence from Malaysia

The Role of Accountability towards FDI Attractiveness Evidence from Malaysia

Impacts of remittances on foreign direct investment in South East Asia - An empirical investigation

This study investigates the effects of remittances on attracting foreign direct investment flows to South East Asia. Using a balanced panel data set for seven countries in the 2000-2013 period, we find that remittances have a direct positive impact on attracting FDI. Significantly, the result also shows a negative correlation between remittances and FDI attraction in countries with low per capita income and small market size.

The effect of political factors on FDI attraction in Vietnam

The effect of political factors on FDI attraction in Vietnam

Pravna nesigurnost kao prepreka za ekonomski rast u Srbiji

Legal uncertainty represents one of the major impediments to sustainable economic growth of transition countries. Inadequate legal framework is often the source of legal uncertainty and strong impediment to effective rule of law and efficient judiciary. The purpose of this paper is to investigate the effect of penal policy on the prevention of tax indiscipline. The improvement of legal framework and tax discipline creates a synergistic effect for attraction of FDI, enhanced allocation of resources and higher economic growth. The analysis of the shortcomings of the existing legal solution is accompanied by the assessment of the prevailing case law and tax evasion criminalization in the selected European countries. Holistic approach to research allowed for the development of a specific proposal for the enhancement of legal framework and, consequently, the increase of legal certainty with positive effects on the economic growth of Serbia in the medium and long term.

What matters most for FDI attraction in services: country or region performance? An empirical analysis of EU for 1997–2012

The European Union is highly attractive for FDI in services but investment is unevenly distributed across EU countries and regions. This paper explores the issue of disentangling national and regional factors in the location choices of service FDI in the EU for the period 1997–2012. Using a dynamic panel Poisson model, our results support the conclusion by Casi and Resmini (Pap Reg Sci 93(S1):51–78, 2014) that both national and regional performances are considered by foreign investors in services when making their location decisions. However, we emphasize that the interplay between regional and national determinants is not straightforward and varies greatly between sectors and groups of countries. In this respect, the business services sector is close neither to the industrial sector nor to the other services sector, whatever the kind of country: those sectors cannot be considered as a single entity when trying to understand FDI location in services. A similar conclusion can be reached about the location in a region within the EU: depending on whether it belongs to the most attractive group of countries or not for service FDI, the combination of regional and national performances under consideration is not the same for investors. Therefore, implementing uniform economic policies across sectors and places to attract service FDI is likely to be inefficient. Policymakers should design specific measures depending on the type of services they wish to attract and should take into account the characteristics of the area at subnational, national or EU level.

THE IMPACT OF INSTITUTIONAL FACTORS ON FOREIGN DIRECT INVESTMENT INFLOWS: CROSS-COUNTRY ANALYSIS

This research paper is devoted to analysis of various institutional factors as determinants of foreign direct investment (further – FDI) inflows to different countries. The objective of the research is to estimate the effect of institutions on FDI inflows. The analysis is provided on a database of cross-country FDI inflows on 72 countries FDI-importers and 112 countries FDI-exporters in the period from 2001 to 2016. It is supposed in the paper that the impact of institutional factors might be different for the groups of developed and developing countries; since developed economies have higher institutional indicators, they tend to attract larger amounts of foreign direct investment compared to developing economies, where institutional development is at the lower level. The estimation is based on the gravity approach, which considers the positive effects of countries’ GDP and the negative effect of the distance between them. The main method used for the econometric estimation is the Pseudo Poisson Maximum Likelihood (PPML) regression, which is considered to be one of the adequate methods for estimating such data. During the research the problems of zero-observations and correlation between institutional indicators are solved. The results have shown that higher quality of institutions tends to attract more foreign direct investment to a country. Thus, institutions in developed countries have positive and significant impact on FDI attraction. At the same time, the analysis of developing countries has shown that some institutions have less significant influence on the FDI inflows. Based on the results of the research, possible recommendations for government policy on institutional improvement can be suggested.

PROBLEMS OF ECONOMIC DEVELOPMENT AND ATTRACTION OF FOREIGN INVESTMENT IN THE COUNTRIES OF THE BLACK SEA REGION

Topicality. The importance of using new opportunities for economic development, sustainability and connectivity in the region and beyond is enhanced in terms of the growing strategic importance of the Black Sea region for the EU. Investments are the basis of socio-economic development of the region. Investments related to the deepest foundations of economic activity, they determine the process of economic growth in general. In modern conditions, they are the most important tool of ensuring the conditions for the overcoming the economic crisis, for structural changes in the countries, for the growth of technological progress, for the improvement of quality indicators of economic activity at micro and macro levels. Aim and tasks. The purpose of the article is to identify the problems of economic development and the associated features of attracting foreign investment in the Black Sea region. Research results. The basic social and economic indicators of the Black Sea region - GDP (GDP), the index of human development, the population, the share of comparison is used to determine the structure and dynamics of incoming and outgoing flows volumes of direct foreign investments regional GDP in the world, are determined, the strategic importance is emphasized on the geopolitical map of the world of the Black Sea region, according the current political and economic challenges in Asian-European relations, dynamics and structure of incoming and outgoing investments of the countries of the region over the last nine years are defined. On this basis was concluded about the significant drop in investment activity in the region since 2014. A list of the main reasons for the decline in investment activity in the region is formed and relationship with the general indicators of economic development of the region is defined. The connection of problems of economic development and attraction of foreign investments to the countries of the Black Sea region is substantiated, which, unlike the existing approach, covers the participants of the whole region, and not a separate country. Approaches to the joint solution of investment problems of the countries of the Black Sea region are developed, which, unlike the existing ones, provide a synergistic effect and greater attractiveness for investors. Research results can be used by enterprises in attracting investment in cross-border projects, also can be used by intergovernmental groups to formulate strategies for joint provision of investment attractiveness of regional programs, can be used by participants in joint enterprises of the Black Sea region. Conclusion. The countries of the Black Sea region are heterogeneous in their economic indicators, thet are belonging to various economic and geopolitical associations. There are explicit leaders among the countries - Russia and Turkey, which have different geopolitical interests in the region and are not able to become a unifying factor in the region. For several years, the Black Sea region is not in the sight of international investors, and all Black Sea countries must work together to become investment attractive again. China's investment interests are identified in a region that does not hold back political commitments to any of the countries in the region. Business opportunities are the most powerful determinants of FDI.. But the particularities of the investment climate, such as strong institutions and regulatory instruments, are also important for developing countries and countries with economies in transition which looking for attraction of additional FDI. With a poor regional investment climate, foreign investors and their host economies may not be able to take full advantage of business opportunities created by market size and growth potential.

An Investigation into the Causal Links Among FDI Determinants: Empirical Evidence from Greece

The attraction of inward FDI in Greece is a critical condition for Greece’s economic recovery due to the prolonged economic crisis and sustained investment hardship. Consequently, this study aims to provide essential implications by examining factors that can influence foreign direct investment decisions. The findings provide new insights regarding the diachronically high importance of technological capabilities compared to other FDI determinants such as the market size, trade openness, quality of the indigenous workforce, and local infrastructure, as the main determinants of inward FDI in Greece over the period 1980–2016.

Strengthening the FDI Attraction to Bac Ninh Province of Vietnam in New Context, Vietnam

Strengthening the FDI Attraction to Bac Ninh Province of Vietnam in New Context, Vietnam