Dynamics Of Foreign Direct Investment Research Articles

Foreign Direct Investment and Economic Development: An International Perspective

Foreign Direct Investment and Economic Development: An International Perspective

Economic freedom and foreign direct investment in Brazil: an empirical analysis of determinants and policy implications

PurposeThis paper aims to study the impact of economic freedom and some key macroeconomic variables on the foreign direct investment (FDI) inflow in Brazil.Design/methodology/approachAn econometric model is developed that includes FDI inflow as the dependent variable and macroeconomic variables such as the output, current account balance, the real exchange rate, openness and economic freedom as explanatory variables. Annual time series data from 1995 to 2022 is used. Before carrying out the estimation, the time series properties of the data are diagnosed using unit root tests and cointegration tests. Since the data series were found to be stationary in the first difference form and the variables in the model were cointegrated, an error correction model is developed and estimated.FindingsThe findings demonstrate that the size of the market (gross domestic product), current account balance and the economic freedom index significantly influence FDI inflow to Brazil. Although the signs of openness and the real exchange rate align with theoretical expectations, they do not attain statistical significance.Originality/valueTo the best of the authors’ knowledge, this is the first formal study on the impact of economic freedom on the FDI inflow in Brazil. The finding of this study adds value to the understanding of FDI dynamics in Brazil, highlighting the critical role of economic freedom and market size in attracting foreign investment.

FOREIGN DIRECT INVESTMENT ANALYSIS OF INDONESIA 1992 – 2022

Foreign direct investment (FDI) plays an important role in the economic development of a country, including Indonesia. This research uses descriptive qualitative and quantitative methods with secondary data in the form of open data from the World Bank and the Central Statistics Agency to analyze the development of FDI in Indonesia from 1992 to 2022. Foreign investment fluctuates, influenced by economic and political crises, changes in infrastructure, and challenges. Although Indonesia has successfully recovered from the economic crisis of the late 1990s, the COVID-19 pandemic had a significant impact in 2020. The government's response and stimulus measures have helped maintain economic recovery. The synergy between the Indonesian government and foreign investors can boost national economic growth. This study provides an in-depth understanding of the dynamics of FDI in Indonesia and provides a basis for improving policies and strategic direction for sustainable economic development. Despite existing challenges, Indonesia continues to attract investor interest from various countries and sectors, with the potential to increase equitable investment allocation in the region.

ОЦІНКА ІНВЕСТИЦІЙНОГО ПОТЕНЦІАЛУ УКРАЇНИ В СУЧАСНИХ РЕАЛІЯХ

The article addresses the issues related to the essential interpretation of the term "investment potential," its assessment in the current realities of Ukraine, and understanding of its role in crisis management of the national economy in modern conditions. The aim of the article is to identify investment potential as an economic category in the context of crisis management of the country's economy and determine its current state in Ukraine. An analysis of theoretical approaches to defining the concept of investment potential has been conducted, and they have been categorized into resource, probabilistic, market, capacity, structural, and performance directions. The definition of crisis management of the national economy is characterized, attempting to determine the role of the country's investment potential in such management. An analysis and assessment of the dynamics of foreign direct investments in Ukraine from 2002 to 2022 have been carried out, revealing that their total volume during the war year decreased by almost five times, negatively impacting the country's economy. The research emphasizes the necessity for Ukraine to enhance its investment potential to finance the needs of recovery and stabilization of the economic situation, both in the post-war period and the current stage, considering the challenges of digitization. The article argues that due to russia's military aggression and the prolonged war, Ukraine needs to explore new solutions to bring the national economy out of a crisis state and overcome the destructive consequences of warfare through digital solutions. This is achievable by boosting the country's investment potential, especially considering the insufficient domestic resources.

Impact of Pandemic on Foreign Direct Investment - A Study from Global Perspective

Abstract: The global economic landscape has been significantly influenced by health pandemics, leading to heightened uncertainties. Using data from past epidemics and economic downturns, this research paper examines the repercussions of these health crises on global economies. Prominent among these health crises is the 1918 influenza epidemic, which Garrett (2008) reveals had severe impacts on investment, human capital, and consumer behaviour. In more recent history, the SARS outbreak in 2003, as analysed by Lee and McKibbin (2004), cost the world an estimated USD 40 billion, highlighting the tangible economic costs of health pandemics. COVID-19, emerging at the end of 2019, has created another layer of global economic uncertainty. Containment measures such as lockdowns and social distancing have led to a ripple effect, causing a downturn in various economic sectors. To better understand the scale of this uncertainty, this study employs the newly developed World Pandemic UncertaintyIndex (WPUI) – a tool introduced in 2020 specifically to measure the economic and political uncertainties introduced by pandemics.A crucial focus of the research is the impact of health pandemics on Foreign Direct Investment (FDI). FDI, a major non-debt financial resource, plays an instrumental role in the economic development of nations. It introduces technical know- how, generates employment, and can be seen as a barometer of a country's economic health. Using the WPUI, the study investigates the consequences of health pandemics on FDI in 142 countries from 1996 to 2019. It identifies patterns in different regions and economic brackets,adding new insights to existing literature. The COVID-19 pandemic has significantly impacted global foreign direct investment (FDI), causing disruptions in both inflows and outflows across countries and regions. This study, drawing from quantitative data from the World Bank and UNCTAD and qualitative insights from FDI experts, examines the extent and nature of this impact from 2019-2023. Results indicate a pronounced decline in FDI flows in 2020 and 2021, with varying impacts based on regional development, economic structures, and exposure to the pandemic. Factors such as digitalisation, diversification, and cooperation have influenced these FDI trends. This researchoffers valuable insights for policymakers navigating the post-pandemic FDI landscape, emphasising the need for further studies on the long-term effects of the pandemic on FDI dynamics. The study further narrows down its focus to India, analysing the FDI trends before and after the advent of COVID-19. Secondary data sources, including RBI bulletins and economic survey reports, provide insights into FDI equity inflows during the pandemic. Preliminary results suggest a considerable dip in FDI equity inflows at the onset of the pandemic. However, there's a noticeable recovery in the second quarter of FY-20, aided in part by significant investments, such as Google's $10 billion injection into the Indian market.In light of these findings, the study offers several solutions to mitigate the impact of pandemics on FDI. These range from promoting investment stability, diversifying investment promotion, and supporting digital transformations, to ensuring global health preparedness and implementing robust economic recovery plans. Effective execution of these strategies, tailored to a country's specific needs, can create an environment more receptive to foreign investment

The Analysis of Indonesia’s Nickel Export Affecting the Dynamic of Foreign Direct Investment (FDI) inflows in Indonesia: Multiple Regression Analysis

Indonesia is a major player in the global nickel market, with the country's nickel exports accounting for a significant percentage of its total exports. Despite this, Indonesia has experienced fluctuations in its foreign direct investment (FDI) inflows in recent years. The purpose of this study is to explore the relationship between Indonesia's nickel export and FDI inflows. By understanding the dynamics of FDI in Indonesia, policymakers can better design policies that support economic growth and attract investment to the country. The study used time series data from 1990 to 2021, with the research objects being Indonesia and FDI. The variables analyzed included FDI, Percentage of Total Exports that are Nickel, Nickel Export Value, and Nickel Export Volume. The research method was the OLS regression method with multiple regression analysis, including unit root and classical assumption tests. The result of the study shows that the percentage of total exports that are nickel has a significant negative effect on FDI inflows, while Indonesia's nickel exports value and nickel export volume being positively significant influential factors on FDI inflows in Indonesia.

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.

Foreign Direct Investment Inflow Dynamics: The Case of Central and Eastern Europe

This study investigates the dynamics of foreign direct investment (FDI) inflows into Central and Eastern European countries (CEECs) using panel data (1994–2020) analysis methods such as fixed effects, fully modified ordinary least squares (FMOLS) and random effects. Specifically, the study examined what factors could account for the mixed pattern of FDI inflows into CEECs. The mixed results from the existing empirical literature on FDI inflow dynamics triggered the undertaking of this study to contribute to the ongoing debate on the subject. The study notes that infrastructural development, economic growth and domestic investment had a significant positive influence on FDI across all three panel data analysis methods. Other variables that were found to have had a significant positive effect on FDI include (1) complementarity between infrastructural and financial development (fixed effects, random effects), (2) trade openness (fixed effects) and (3) savings (random effects, FMOLS). A significant negative impact of the exchange rate on FDI was observed under the FMOLS. CEECs are therefore urged to implement policies to increase infrastructural development, financial development, trade openness and savings to enhance the inflow of FDI. Future studies should investigate the minimum threshold levels of the explanatory variables of FDI.

A joint spatial econometric model for regional FDI and output growth.

This paper studies the joint dynamics of foreign direct investments (FDI) and output growth in European regions by using spatially augmented systems of equations modeling framework that incorporates third-region and spillover effects. The joint framework is used to study the dynamic impacts of regional human capital endowments, which demonstrates the importance of explicitly accounting for an endogenous relationship. The relationship is highlighted in a stylized projection exercise, where the long-run impacts are pronounced in Eastern Europe and capital cities. Overall, ignoring the relationship of regional economic performance and FDI distorts the implied transmission mechanism, which is of utmost importance for policy makers.

Прямі іноземні інвестиції в Україну в умовах інтеграції до Європейського Союзу

The purpose of the article is to study the prerequisites for the inflow of foreign direct investment in Ukraine and the reasons that slow down this process, in particular in the context of EU integration, as well as to analyze the dynamics of foreign direct investment in Ukraine. The dynamics of foreign direct investment in Ukrainian economy in 2002-2022 were analyzed, with consideration of the reasons for their changes over the study period. Starting from 2013 and until 2016, the volume of investments declined rapidly, which was caused by political instability in the country and a number of other reasons; in 2020, the COVID-19 pandemic became a major challenge, which also had its extremely negative consequences for the economies of countries and investors, and in 2022, russia’s full-scale invasion of Ukraine led to a decrease in foreign direct investment from 6687 million US dollars in 2021 to 190 million US dollars in 2022. One of the main problems of the Ukrainian economy is the low return on investment and its inefficient distribution. An analysis of foreign investment by type of economic activity leads to the conclusion that the largest share of foreign direct investment goes to the developed economic sectors. The main factors that negatively affected the dynamics of foreign direct investment in different periods were investor distrust caused by the high level of corruption in the country, doubts about the fairness of the judicial system, monopolization of markets, and instability of the national currency; russia’s war against Ukraine (since 2014); the COVID-19 pandemic; russia’s full-scale invasion of Ukraine (since February 2022), which still continues. Ukraine’s European integration processes, along with reforms designed to accelerate these processes, as well as the end of the war in Ukraine, will help attract foreign direct investment aimed at recovering and developing Ukraine.

Экономико-аналитический подход к оценке налоговых рисков отсутствия фактического права на доход

The subject of the study is the identification by the tax authorities of the dependence of the jurisdiction of the location of the parent companies of Russian organizations on the amount of additional charges for corporate income tax withheld at source in Russia, while controlling the actual right to income (FPA) of a foreign organization. The purpose of the work is to develop proposals for tax risk management in determining the FPA. The article, in conjunction with the analysis of the dynamics of foreign direct investment from Russia, analyzes information on changes in the amounts of corporate income tax paid when paying passive income to foreign recipients, as well as data on the amount of additional tax when monitoring the status of the FPA. As a result of the analysis of court decisions on the basis of the "geography" of the beneficial owners of income from the Russian source, the relationship between the jurisdiction of registration of parent companies of taxpayers and the average amount of additional corporate income tax due to non-compliance with the status of the FPA was established. It is concluded that in the overwhelming majority of tax disputes on the status of the FPA, foreign companies – recipients of income were recognized by the courts as conduit companies created to take advantage of registration in low-tax jurisdictions and abuse the provisions of international tax treaties. It was revealed that over the past seven years, the reason for the outflow of capital from the country was the desire of taxpayers to reduce the effective tax rate by withdrawing profits to low-tax jurisdictions, in which large firms prefer Singapore for structuring cash flows in most cases.

ПРЯМІ ІНОЗЕМНІ ІНВЕСТИЦІЇ: СТАН ТА ПЕРСПЕКТИВИ РОЗВИТКУ

The article is devoted to an analysis of the state and prospects for attracting foreign direct investment into the Ukrainian economy under martial law. The essence of the concept of “foreign direct investment” explored and its characteristic features are determined. It established that in the legislative acts of Ukraine only the concept of “foreign investments” presented for consideration and their content described. The role of transnational companies at the present stage of attracting foreign investment to Ukraine outlined. A list of transnational companies operating in the domestic investment market provided. An analysis of the dynamics of foreign direct investment in Ukraine carried out based on the principle of direction. The unstable nature of cash flows revealed. It established that a significant part of foreign direct investment in the overall structure made up of those directed to Ukraine. However with the advent of war in 2022, the already not very high investment attractiveness of the Ukrainian economy decreased. This significantly complicated the economic situation in the country and significantly decreased its investment activity. An assessment was made of the scale of capital reinvestment in Ukraine through “round tripping” operations. Their unstable dynamics established and it revealed that the most significant volumes of foreign direct investment were directed to industries and institutions engaged in wholesale and retail trade. The main investor countries for round tripping operations presented, of which a significant part belongs to Cyprus and the Netherlands. Because of the study, factors identified that negatively affected the processes of foreign investment in Ukraine and related to the war and business rules. Recommendations developed that take into account general economic and institutional conditions for activating the foreign investment market in Ukraine. Separate effective mechanisms for their implementation presented. The need to formulate a state investment policy to further attract foreign investment into the Ukrainian economy for recovery after the war noted. This is due to the priority of restoring the domestic industrial and agricultural complex, increasing the country’s export potential by implementing strategies to overcome the economy’s dependence on imported energy resources, etc.

The Dynamics of Foreign Direct Investment in the Philippines Reviewing the Role of Government Policies, Risks, and Benefits of Fostering Economic Growth and Development

The Dynamics of Foreign Direct Investment in the Philippines Reviewing the Role of Government Policies, Risks, and Benefits of Fostering Economic Growth and Development

Analysis of the current state of investment attractions of Ukraine

The article is aimed at analyzing the investment climate of Ukraine and defining the existing problems of attracting foreign investment to the country’s economy. The article carries out a static analysis of the main macroeconomic indicators of Ukrainian investment climate. The approaches of domestic economic scientists to the definition of the concept of «investment climate» are considered. The main factors influencing the investment attractiveness of the State, region and economic entity are defined. The interdependence of the factors of influence of the macro- and micro-levels on the level of their investment attractiveness is specified. In particular, the level of investment attractiveness of enterprise depends to a certain extent on the investment attractiveness of the State and its regions. The authors analyze the dynamics of foreign direct investment in the Ukrainian economy for the period of 2002-2022, as well as carry out comparisons with the volume of foreign direct investment from the Ukrainian economy, and the main changes in their proportions. The countries of the European Union, which provide more foreign investment to Ukraine, are considered. It is concluded that the investment climate in the country has improved, but unfortunately there have been no significant changes. It is identified that the investment climate of the State remains unfavourable for the external investor. Taking into account a number of existent negative factors with regard to the investment attractiveness of the country, as well as its course towards European integration, it is necessary to implement efficient reforms, one of the priorities of which should be improving the investment attractiveness of the country.

ТРАНСФОРМАЦИЯ ИНВЕСТИЦИОННЫХ СВЯЗЕЙ СТРАН ПРИБАЛТИКИ И ПОЛЬШИ

The article presents an analysis of investment ties’ development of Poland and Baltic states. The author assesses general dynamics of foreign direct investment and identifies main stages and factors influencing FDI. The conclusion is substantiated that these countries continue to play the role of capital importers and there are no fundamental reasons for this situation to change. The author analyzes main disproportions of investment ties, including sectoral and territorial aspects, and identifies the common features and key differences of investment sectors of Poland and Baltic republics. Based on the calculation of HerfindahlHirschman index the change in the level of diversification of the sectoral structure of inward and outward FDI in Poland, Estonia, Latvia and Lithuania since 2010 has been assessed.

MACROECONOMIC ANALYSIS AND FORECASTING OF FOREIGN DIRECT INVESTMENT INFLOW: EVIDENCE FROM UKRAINE

Attracting foreign investment is a viable means of ensuring the economic growth of any country. The relevance of the study is substantiated by the creation of a favorable investment climate in the country, which will allow the establishment of guarantees of protection of foreign investments and stability of the legal basis for entrepreneurship performance. The article aims to analyze and forecast the inflow of foreign direct investment (FDI) into Ukraine. In order to achieve the stated purpose, the econometric model was developed, which demonstrates the correlation between macroeconomic indicators, their characteristics and the amount of FDI. A set of general scientific and special research methods were used, in particular: induction and deduction, grouping, summarization, comparison, complex and systemic approaches. The article reveals the essence of foreign investment for the Ukrainian economy and defines the characteristics of FDI. The impact of FDI on the economy of Ukraine is analyzed in detail and the conditions for their attraction are substantiated. Using statistical methods, the structure and dynamics of FDI by types of economic activity and investor countries are investigated. The conducted research has shown that through the attraction of foreign direct investment economic growth, the well-being of the population, the reduction of foreign indebtedness and efficient state capital investments are ensured. Taking all this into account the necessary preconditions for the attraction of foreign direct investments into the Ukrainian economy were substantiated.

The dynamics of Foreign Direct Investment (FDI) inflows in developing economies: Evidence from Bangladesh

The dynamics of Foreign Direct Investment (FDI) inflows in developing economies: Evidence from Bangladesh

Analysis of the Current State of Investment Activity in Ukraine: Macro- and Micro-level

The article deals with the essence and significance of investment activity at the macro- and micro-levels as the main factor of changes in the economy and interdependence of countries and enterprises. The article’s authors prove that the development of investment processes in all areas of activity is a necessary condition for effective business organization. It is noted that the significance and essence of investments is reflected in their functions. The authors define functions of investments at the macro- and micro-levels. The authors consider variable factors of the macro- and microeconomic environment that affect investment processes in a particular industry. To determine the state of investment activity at the macro-level, the authors have conducted a research of foreign investment. The article discloses the dynamics of foreign direct investments in the economy of Ukraine and from the economy of Ukraine in other countries, their share in a total volume of foreign direct investment, the dynamics of capital investment and their share in the structure of GDP. The author studied and identified major objects for investing in Ukraine. The article describes the role of domestic investments as the most active element of economic growth in the country. The article highlights modern obstacles to its development. Since Ukraine remains geographically, economically, and socially attractive country for investing at both macro- and micro-levels, the authors suggest to identify prior areas for improving its investment climate.

The dynamics of foreign direct investment and exchange rates: An interconnection approach in ASEAN

This paper examines the direct and spillover effects of the exchange rate on foreign direct investment (FDI) inflows based on a panel of ASEAN countries for the period 2001 to 2018. We utilize the spatial econometric approach to accommodate the nature of spatial dependence among ASEAN countries. Our results suggest that the effect of the exchange rate depends on the source-region of FDI, implying the existence of spatial heterogeneity in ASEAN’s FDI. We also show that FDI inflows in ASEAN is not only influenced by the exchange rate of the country itself but also by those of the neighboring countries.

Assessing the Policy of Attracting Investments in the Main Sectors of the Economy in the Context of Introducing Aspects of Industry 4.0

The purpose of this work is to study and evaluate the impact of world commodity prices on the dynamics of investment in exporting countries of natural resources using the developed methodology under the influence of industry 4.0 aspects. Modern economic activity is accompanied not only by the impact of COVID-19, but also by the impact of the first manifestations of industry 4.0. This applies not only to export-import operations but also to the very need for them due to the cost of new technologies. Using mathematical methods, we investigate the impact of world commodity price indices, in particular, the general commodity price index, the agricultural commodity price index, the food price index, the metal price index, and the crude oil price index, on the dynamics of investment in commodity-type economies in both dimensions – level and volatility. The innovativeness of the study lies in determining the significance of the impact of world commodity prices on the dynamics of foreign direct investment (FDI) of raw material exporting countries (on the example of three groups of countries with different levels of economic development). The proposed methodology makes it possible to empirically evaluate the mechanisms of the macroeconomic impact of commodity prices on investment dynamics.