Distribution Of Foreign Direct Investment Research Articles

Foreign direct investment, sectoral distribution and income inequality in developed and developing economies

Despite some progress in reducing income inequality between countries over the last two decades, there is evidence that income inequality is on the rise within nations. This article uses panel data compiled from multiple sources and a growth curve modeling approach to examine the relationship between foreign direct investment (FDI) and within-nation income inequality across two samples: one comprising 2,095 country-year observations nested in 141 countries from 1991 to 2018 to explore the broader FDI-income inequality relationship, and a second, more focused sample of 405 country-year observations nested in 61 countries from 2000 to 2018, designed to analyze effects of the sectoral distribution of FDI. The analyses find that the relationship between FDI and income inequality is positive and linear for non-OECD economies but follows an inverted U-shaped path for developed countries. Moreover, in this article, I have developed and introduced two new indices, the FDI Pluralism Index and FDI Sectoral Gini Coefficient, to measure the distribution of FDI among the sectors of the host economy. Results show that a concentration of FDI in one sector aggravates income inequality since foreign capital tends to flow into the most profitable industries, creating uneven growth between sectors and increasing between-sector income inequality.

Analysis of the Influence of FDI on Employment in China

Since the reform and opening up, China continuously improves the investment environment, the foreign direct investment (FDI) continues to grow, which has an impact on all aspects of our economic activity. In recent years, due to the influence of the novel coronavirus epidemic, China's employment situation has fluctuated to a certain extent. How to use foreign direct investment (FDI) to stabilize China's employment situation and increase the number of employment has profound practical significance. Based on this, this paper uses China's 2011-2020 provincial panel data to study the impact of FDI on employment in China. The empirical results show that FDI has a promoting effect on employment in China, and the robustness and endogeneity tests support this conclusion. In view of this, the government should make full and rational use of foreign direct investment, balance the distribution of foreign direct investment between regions, and guide the adjustment of the structure of investment introduction.

Regional Distribution of Foreign Direct Investment in India

The tremendous rise in Foreign Direct Investment (FDI) inflows following the economic reforms in 1991, has been one of the most prominent features shaping the behavior of the Indian economy in the past three decades. The present study is based on secondary data and the objective is to examine the trends in FDI inflows to India following the global financial crisis, for the period 2009-2010 to 2021-2022. Additionally, the distributional pattern of FDI among the regions and states of India is also analyzed, using the data for 30 states/territories. The results reveal that total FDI inflows have increased in substantial amounts over the period from US$ 37,745 million in 2009-2010 to US$ 84,835 million in 2021-2022. Maharashtra and Karnataka have surpassed all other states in FDI equity inflows over the period from October 2019 to September 2022. These two states have commanded 50 percent of the total FDI, whereas the regions in central, eastern, and northeast India have received less than 3 percent of the total FDI equity inflows. Thus, the regional disparities in the distribution of FDI are quite visible post-analysis. It is suggested that government should focus on making investor-friendly policies to tap the potential of regions neglected by foreign investors.

MODERN DETERMINANTS OF FOREIGN INVESTMENT’ ACTIVATION IN THE INTERNATIONAL FINANCE AREA

The article defines the modern determinants of foreign investments’ activation in the international financial space. Foreign investments became a decisive driver for the formation of additional competitive advantages in the global capital market, ensuring the transfer of capital, knowledge, and technologies across borders. Foreign investment flows become the basis for forming a single system of relations and a new configuration of the world economy. The dynamics of foreign direct investment (FDI) by groups of countries and regions were analyzed. Over the past two decades, global FDI flows have grown rapidly, largely due to the intensification of investment activity in developing countries due to accelerating economic growth, increasing market potential, and using effective government policy tools to stimulate foreign investment. The specifics of the distribution of foreign direct investment between host countries have been determined in view of the consequences of the COVID-19 pandemic. The pandemic didn’t affect the countries’ ranking among the leaders in attracting and exporting FDI. Due to the export of FDI from Hong Kong (China) and Thailand, Asia became the only region where growth in FDI flows was recorded during the pandemic, and China became the largest investor in the world in 2020. As a result of quarantine restrictions and measures to counter the consequences of the pandemic, the lowest fall in FDI indicators over the last decade. The fact that the number of restrictive measures against foreign capital in 2022 increased sharply, mainly due to the war in Ukraine has been determined. Such procedures included sanctions against financial institutions; trade and transportation restriction measures; travel bans and asset freezes for hundreds of individuals and legal entities. The peculiarities of the recovery of FDI indicators in the post-Covid period are highlighted, and it is determined that in the near future, new risks may arise for the stable development of international investment activities in view of the war in Ukraine and a number of new shocks in the world economy.

Assessment of Attractiveness of the Baltic States for Foreign Direct Investment: The TOPSIS Approach

Foreign investment is one of the driving forces of a country’s economy. The global foreign direct investment (FDI) flows in 2020 amounted to USD 1 trillion, but FDI distribution varies from country to country. Here, the questions arise as to what determines the choice of foreign investors, what the countries can do/are doing to attract FDI, and which Baltic states are the most attractive for FDI. Based on the scientific literature analysis, the definitions of FDI and the attractiveness for FDI, as referred to in the empirical study, are reviewed; the factors affecting FDI are singled out, and the methods/models that are applicable for assessing FDI are investigated. The major purpose of the article is to assess the attractiveness of the Baltic states for foreign direct investment. Research methods: comparative analysis of the concepts and methods available in the scientific literature, secondary data analysis, statistical data processing, and multi-criteria evaluation methods. The results of the assessment of the attractiveness of the Baltic states for foreign direct investment that were determined by applying the TOPSIS multi-criteria evaluation method helped to determine a country’s position in relation to its neighbors and revealed the criteria that weaken or strengthen this position. The results of the research can help the leaders of the states to select the relevant measures to improve their state’s FDI attractiveness in relation to other states.

АНАЛІЗ СТАНУ, ТЕНДЕНЦІЙ ЕКОНОМІЧНОГО РОЗВИТКУ ТА ПОЗИЦІЇ КИТАЮ В ГЛОБАЛЬНІЙ ЕКОНОМІЦІ

The paper is devoted to the analysis of China's position in the global economy. China became one of the fastest growing economies in the world since it’s opening to foreign trade and investment in 1979. The main factors that contributed to rapid economic growth were defined as: large-scale capital investments, rapid growth in productivity, economic reforms that led to the efficiency increasing of the economy, production growing and resources expanding for additional investments in the economy. The real annual growth of China's GDP from 1980-2022 was analyzed. From 1979 to 2017, China's real GDP grew at an average of almost 10% annually. But the COVID-19 pandemic and the measures taken to contain it caused the biggest slowdown in China's economic growth in 2020, to 2.2%. A comparison of the shares of China and the United States in the world GDP by PPP was made. Accordingly, the conclusion – it was the first case in history when China was the world's largest economy in 2017. It was determined that the United States and China are the two largest economies in the world by both nominal GDP and GDP per PPP (purchasing power parity). The US leads in nominal terms, while China leads in PPP terms, overtaking the US by 39%. Over the past few years China has become the world's largest exporter and ranks second place among the world's largest importers thanks to its huge active trade balance. According to the World Investment Report 2022 of the United Nations Conference on Trade and Development (UNCTAD), the United States and China are the main recipients of global FDI (foreign direct investments), as well as the main investors. As China continues to lead the global recovery from the adverse economic effects of the COVID-19 pandemic, foreign multinational corporations are doubling their investments in China, establishing thousands of new firms and expanding existing ones. The main recipients of Chinese FDI are Hong Kong, the US, Singapore and Australia. Hong Kong absorbs the largest amount of FDI from China and plays a special role. The distribution of Chinese FDI by sector shows that Chinese investors most prefer investments in leasing and business services, financial services and manufacturing.

Sectoral distribution of FDI and employment: Evidence from post- transitional European countries

This paper examines, from the perspective of Post-Keynesian economics, the effects of Foreign Direct Investment (FDI) on the employment rate in 18 post-transitional European countries from 1995 to 2021. Using a two-step system Generalised Method of Moments (GMM) panel data estimator, we test the hypothesis that the employment impact of investment depends on the interaction of FDI and domestic investment in terms of crowding-in and crowding-out relationships, assuming that this relationship is sensitive to the sectoral distribution of FDI stock. Our findings suggest that the reallocation of FDI inflows from the manufacturing sector to the less labour intensive financial and information and communication technology (ICT) sectors tends to reduce the employment effect of FDI both directly and indirectly by reducing the magnitude of the crowding- in effect of FDI on domestic investment. The outcome of our study is of great interest to economic policy makers. If foreign investment displaces domestic investment and reduces employment in high value-added sectors, policies intended to attract foreign capital could be challenged and undermined. Otherwise, if foreign and domestic investment in sectors with high added value are complementary, it justifies policies aimed at attracting foreign investment.

Labor and infrastructure factors affecting provincial distribution of foreign direct investment in Vietnam

The study assesses the influence of labor and infrastructure on attracting foreign direct investment (FDI) to the provinces of Vietnam in the period of 2009 - 2020. Research results from linear regression model and random effects estimation method have confirmed the importance of human capital and infrastructure in attracting FDI. The labor-related aspects in this study confirm that tendency of MNEs focusing on labor-intensive industries in Vietnam has not changed. The study also provides policy implications as building and improving the quality of infrastructure with the main goal of reducing inequality in attracting more FDI inflows to Vietnam's provinces in the near future. In addition, the workforce needs to have a plan to prepare themselves with solid knowledge and necessary skills to hone and absorb the know-how transferred from foreign investment companies, to have an ability to contribute to the development of the quality of our country's human resources.

The impact of location tax incentives on the growth of rural economy: evidence from Ghana

Over the last two decades, location tax incentives programs serving as a motivating force have been progressively well known as activities to draw in and/or hold foreign direct investments (FDIs) in economically blighted areas. The study examined the impact of location tax incentives on the growth of the rural economy of Ghana from the period of 1994 to 2018. The data were sourced from Ghana Investment Promotion, UNCTAD, and the World Tax Database. Using ARDL Cointegration and Error Correction Models were estimated to examine the static and dynamic long-run effects as well as the short-run dynamics of the system and the speed of adjustment to the long-run equilibrium. However, FDI is skewed towards the Greater Accra region, Ashanti region, Central region, and Eastern and Western regions notwithstanding the location tax incentives the government has been given since the 1990s. The study shows that there is a positive and statistically significant effect of tax incentives on employment creation and rural development in the long run. It revealed that trade openness and market size have a significant effect on employment creation and rural development. It emerged that there is no correlation between location tax incentives and the regional distribution of FDI in Ghana. It has become a well-established fact that adequate tax holidays are beneficial to businesses and encourage them to make investment decisions. It is therefore recommended that a more extensive mindfulness crusade through workshops, courses, and advertisements is necessary to empower the investors about the accessible business opportunities.

Effect of Investment Promotion through the Special Economic Zone Mechanism on the Distribution of FDI in Cambodia

This study examines the effect of investment promotion through the special economic zone (SEZ) mechanism on foreign direct investment (FDI) inflow across Cambodia. We applied generalized methods of moments (GMM) to panel data constructed from 19 Cambodian provinces during 2015–2019. Our results show that the number of SEZs positively affects both FDI inflow and diversification across the country, while capital invested in developing SEZs increases only the latter. Other SEZ variables, including the presence of SEZ, its intensity, and the age of the first established SEZ in a province, are mostly found to be positively associated with FDI and diversified FDI but not notably significant. Supportably, the existence of SEZ is confirmed to be significant by the t-test method, meaning that the SEZ province can attract more FDI than the non-SEZ one. Some provincial efforts and characteristics, including annual government expenditure, number of public relations, population density, population 18 years old and up, deep-sea ports, and international gates, likely significantly influence FDI inflow into the provinces of Cambodia. All in all, the SEZ mechanism attracts more diversified foreign investment activities, and it has a significant effect on the distribution of FDI in Cambodia.

Проблемы учета прямых иностранных инвестиций в международной и российской статистике

The paper discusses the approaches to statistical accounting of foreign direct investment (FDI) present in Russian and international practice, as well as alternative approaches to accounting of FDI using microdata. International practice shows that often the official statistics provided by national central banks according to the methodology of the International Monetary Fund (IMF) and the Organization for Economic Cooperation and Development, and alternative estimates of FDI at the enterprise level differ significantly. The purpose of this article is to identify the main problems of traditional methods of accounting FDI and assess the applicability of the microdata approach to address these problems. To this end, the paper analyzes the recommendations of the OECD and the IMF on accounting FDI in statistics, as well as the methodology of the Central Bank of the Russian Federation (CBR). According to the author, the methodologies of international organizations do not solve a number of problems in relation to the Russian ones. Thus, the present methodologies do not address the issue of offshore FDI, as well as the actual geographical distribution of FDI in the regions of the Russian Federation. The article demonstrates that a number of problems associated with traditional FDI statistics can be addressed with enterprise microdata. The article proves why traditional statistics can give a distorted picture due to unresolved issues of these and other issues, and shows how microdata can help in solving this problem. In particular, micro-level data helps to understand the structure of FDI at the regional level, as well as the role of offshore companies in the structure of inbound and outbound FDI.

Determinants of Foreign Direct Investment in Jiangsu Province, China

China has turned to be one of the world’s most significant foreign direct investment (FDI) recipients, with FDI stock second only to the United States. Even though total FDI in China is substantially large, the spatial distribution of FDI is extremely uneven. The eastern coastal regions have always been important areas of China to receive FDI. Among the eastern coastal areas, Jiangsu province is consistently ranked second behind Guangdong province in terms of total FDI in China. However, FDI inflows of Jiangsu province surpassed Guangdong province for the first time in 2003. Although Jiangsu province has become a remarkable destination of FDI, the current FDI growth rate has started reducing. Therefore, it is crucial to investigate the determinants of FDI in Jiangsu province. Consequently, this study examines the determinants of FDI in Jiangsu province by employing an autoregressive distributed lag (ARDL) model with annual data during 1985-2019. In addition, we apply the Toda-Yamamoto Granger causality test to increase the robustness of our empirical results. The findings show that FDI in Jiangsu province is determined by average wage, education, and per capita GDP. Consequently, Jiangsu authorities should implement a policy to ensure a low wage rate and promote education in order to attract more FDI. In addition, the policy on economic development is needed to promote inward FDI in Jiangsu.

ФОРМУВАННЯ ІНВЕСТИЦІЙНОГО РИНКУ В УКРАЇНІ

A necessary condition for the development of the economy is an increase in the investment activity of investors in the country, an increase in investment resources and their effective use. Therefore, the study of trends in the development of the investment market is relevant and of great practical importance. Specifically, investments form production potential on the latest scientific and technical basis and determine the competitive positions of states in world markets. The study of the formation of the investment market in Ukraine made it possible to form the following conclusions:  the total volume of foreign direct investment in Ukraine in 2020 amounted to $ 453 million. USA, which is 14 times less than in 2010;  the study of the geographical structure of foreign investment made it possible to determine that in 2020, 453 million dollars were invested in the Ukrainian economy by direct foreign investors from more than 76 countries of the world. US direct investment It should be noted that the main investing countries include Cyprus – 31.1 %, the Netherlands – 20.2 %, the UK – 6.1 %, Switzerland – 6.0 %, Germany – 4.6 %, Austria – 3.3 %;  analysis of the distribution of foreign direct investment in the context of sectors of the economy in Ukraine made it possible to note that the greatest interest among foreign investors in 2020 was aroused by industry - 180.35 million dollars. USA, that is, 39.8 %. The leading spheres of economic activity in terms of the development of direct investments in 2020 remain: wholesale and retail trade, repair of motor vehicles and motorcycles – 106.9 million dollars. The United States, accounting for 23.6 %; financial and insurance activities – $ 96.9 million, which is 21.4 %. Thus, Ukraine remains attractive for investments and is not aloof from world processes, is sufficiently integrated into the world economy and the violation of macrostability in foreign markets has its echo in Ukraine. Thus, the investment market is a rather complex phenomenon, with its own internal structural structure, which is sensitive to changes in the external environment. At the present stage, its construction is represented by the classification of structural and infrastructural elements, as well as by supervisory and control bodies, ensuring its functioning thanks to market mechanisms.

Investment cooperation between Russia and India

The long-term cooperation between Russia and India in the investment field is analyzed. This cooperation is of great strategic importance not only for the development of these countries, but also for solving problems at the global level. The world is currently undergoing large-scale changes affecting various spheres of public life. On the basis of Russian and Indian statistics, as well as statistics of international organizations, conclusions are drawn about the uneven distribution of foreign direct investment between Russia and India, and their different position in the international movement of capital is indicated. Examples of specific investment projects between TNCs of the two countries are given. Prospects for investment cooperation between the two countries have been substantiated. The purpose of this research is to study investment cooperation between Russia and India. The theoretical basis of the study was the works of Russian and foreign authors, which examine the issues of the socio-economic situation of developing countries, and in particular, the economic development of India and Russian-Indian relations. The work used methods of analysis and comparison of theoretical positions, as well as methods of statistical and analogy, expert assessments. It was found that the most interesting projects for the Indian economy are the extraction of oil and other minerals, construction, trade, and real estate. For Russia, the sphere of manufacturing is of particular investment interest, as well as the sphere of trade and the financial sector.

Enterprise ownership patterns in the least developed districts of Slovakia

Research background: The literature overview shows a blank space regarding the effects of ownership on the determination of enterprises' spatial distribution. Various papers identify differences between determinants of the spatial distribution of foreign direct investments, exporters in foreign ownership, and domestically owned exporters; however, they mostly agree on the role of big cities, economic centres, and state of infrastructure as well as historical patterns.
 Purpose of the article: The article focuses on the spatial distribution analysis of enterprise units from their owner's perspective on the empirical evidence from all 79 districts of the Slovak Republic. Special attention is given to the category of the least developed districts.
 Methods: Within the presented article, the authors investigate the characteristics of the regional spatial distribution of business entities concerning standard ownership categories using the cluster analysis. The presented approach is twofold: firstly, the authors investigate the share of individual ownership types on the district level, and secondly, the number of enterprises by ownership categories is adjusted to 100,000 inhabitants. Cluster analysis and methods of spatial statistics are applied in both approaches.
 Findings & value added: The main results show a relation between the district's inclusion into the group of the least developed districts and enterprise ownership characteristics in these districts mainly through the relative underrepresentation of the secluded inland, foreign and international types of ownership, as well as their geographical clustering. The results of the presented research can be used in policy-making targeting business activity in underdeveloped districts. At the same time, the results provide basis for limited theoretical generalisations based on a single-country case study with regard to principles of business ownership structures development.

SECTORAL AND HOME COUNTRY DISTRIBUTION OF FOREIGN DIRECT INVESTMENT IN INDONESIA

This study investigates the distribution of Foreign Direct Investment (FDI) across Indonesian economic sectors and home countries. Using descriptive statistics analysis of secondary data, the result shows that on average, FDI dominated the share of total investment, while domestic investment (DI) led the number of projects in Indonesia. FDI and DI mostly inflow to the chemical and pharmaceutical industry which is a part of manufacturing industries. The largest contributions of total FDI share come from Singapore and Japan. Investors from Japan reached the largest share of investment while investors from Singapore dominated the number of projects across Indonesian regions. Singapore reached the highest FDI share in Banten, Jakarta, Jawa Timur, Kalimantan Barat, Kalimantan Selatan, Kalimantan Tengah, Kepulauan Riau,Riau, Maluku Utara, Papua Barat, Sulawesi Utara, Sulawesi Barat, Sulawesi Selatan, and Sumatera Utara. Japan experienced the highest FDI in Jawa Barat and Jawa Tengah. This study can map the preference of investors from each home country. Investors from Australia and Mauritius mostly preferred to invest in the coal mining sector. Investors from Japan mostly preferred transport-related industries especially the industry of spare parts and accessories for four or more wheel motor vehicles. Investors from Singapore mostly selected telecommunication industries. Investors from South Korea mostly preferred to invest in plastic-related industries and processing industries. Some Investors from China invested in the electricity industry. Many investors from France also invested in the water supply sector. And Investors from the Republic of China mostly preferred to invest in the pulp, paper, and paperboard industry. The Indonesian Government needs to concern about the general characteristics of investors in home countries in attracting foreign investors. For policy purposes, knowing such characteristics provides scientific reasons for a government to have distinct strategies between different targeted home countries in order to attract foreign investors.

Global advantage of Bangalore as a location choice for knowledge‐based industries in India

AbstractAttractive locations based on geographic, environmental and strategic factors stimulate the concentration of economic activities, leading to urban spatial growth (Hariharan & Biswas, 2020). The onset of the knowledge‐based information and communication technology (KBICT) revolution credits the liberalization of India’s economy from the early 1980s. The advent of liberal policies in the early 1990s stimulated foreign direct investment (FDI) in Bangalore City, attributed to its environmental and geographic location advantages. Recognition of Indian skill and talent helped generate more than US$ 100 billion in export revenue and the regional diffusion of FDI, enabling competitiveness in the regional aggregation of KBICT industries. This article analyses the regional distribution of FDI through Dunning’s framework.

A Literature Review on the Location Determinants of FDI

Foreign direct investment (FDI) is an important force to promote economic growth and social development in both developed and developing countries, while the distribution of FDI in the world and within countries is extremely uneven. This paper systematically summarizes the main determinants that affect the location choice of FDI in recent theoretical and empirical studies, including institution and investment environment, trade cost and industrial agglomeration, market size and natural resource, cultural distance and social network. Based on the work of this paper, it is helpful to better understand the location preference of multinational enterprises (MNEs) in FDI activities, and provide a reference basis for the host country to attract investment and promote economic growth.

FOREIGN INVESTMENTS IN THE ECONOMY OF EASTERN EUROPEAN COUNTRIES

Foreign direct investment (FDI) has been debated by many specialists being considered in most cases a source of development for the receiving countries. From this perspective the study is a comparative analysis of FDI evolution in Eastern European countries and an analysis of FDI in Romania. The analysis was carried out over a period of five years and allowed us to obtain useful information regarding the FDI volume expressed in % of GDP, FDI structure and structure of activities in Romania considered attractive for FDI, respectively FDI distribution in the regions of Romania.

The Relationship between Economic Complexity and the Pattern of Foreign Direct Investment Flows among Mexican States

Identifying factors that explain the regional distribution patterns of Foreign Direct Investment (FDI) flows into an economy is no simple task, since they depend on a range of factors. In the case of Mexico, previous studies have documented the role of diverse characteristics in attracting FDI to the country’s states. This study shows that economic complexity - a variable that indicates the productive capabilities or productive knowledge that exist in a given economy’s economic structure - can explain the distribution of FDI among Mexican states. Similar to previous studies, we document the spillover effects of economic complexity, i.e., we show how states surrounded by states with a high level of economic complexity tend to receive more FDI. Moreover, we document how FDI flows to manufacturing industries are positively correlated with their level of economic complexity. This result, to the best of our knowledge, has not been documented before in this literature.