Foreign Direct Investment Inflows Research Articles

FDI impact: catalyzing digital capabilities in host nations

Purpose This study aims to investigate the impact of foreign direct investment (FDI) on national digital capability, specifically differentiating the impact between FDI greenfield and mergers and acquisitions (M&A). The research also investigates factors shaping digital capabilities, encompassing government transparency and absorptive capability, while exploring the mediating influence of absorptive capability in the FDI–digital capability relationship. Design/methodology/approach An econometric model has been developed to examine the interrelationship between national digital capability, FDI inflows, national absorptive capability and government transparency. The data set encompasses 55 countries over a period of nine years (2013–2021). National digital capability data is derived from the well-established index published by the World Competitive Centre (WCC). The sources of the explanatory variables align with standard practices, drawing from reputable institutions (UNCTAD and the World Bank, among others). Findings The findings reveal a significant positive impact of FDI, particularly in greenfield investments, on national digital capability. Government transparency and research and development (R&D) investment are crucial factors contributing to digital capabilities. Additionally, the absorptive capacity, reflected by R&D investment, also emerges as a potential moderating factor, influencing the impact of FDI inflows on digital capabilities. Practical implications The results recommend that policymakers and stakeholders should carefully consider the role of FDI, especially in greenfield investments, as a catalyst for enhancing national digital capability. The findings also underscore the significance of promoting government transparency and directing investments towards R&D to nurture digital capabilities. Moreover, understanding the mediating role of absorptive capability can inform strategies aimed at optimizing the impact of FDI on digital capabilities. Originality/value This study contributes uniquely to the existing literature by being the first to systematically explore the influence of FDI on national digital capability. Furthermore, it presents innovative empirical findings on the role of absorptive capability in enhancing the FDI impact on national digital capability, an area that remains relatively uncharted in current literature.

SOCIAL POLICY REGARDING VETERANS, PEOPLE WITH DISABILITIES AND OTHER VULNERABLE POPULATION GROUPS

The article analyzes the issue of migration as a complex social phenomenon. International population migration in the conditions of growing globalization occupies an important place in the development of modern society and, accordingly, affects young people who, for various reasons, decided to study abroad (in Slovakia). The article reflects knowledge at the theoretical and empirical levels. One of the main tasks of modern higher education is the modernization and efficiency of the professional mobility of future specialists. Student migration is considered as educational migration. We point out that the Slovak Republic is one of the most economically successful countries in Central-Eastern Europe. Economic reforms and accession to the EU, combined with significant inflows of foreign direct investment, have led to sustained economic growth and job creation. Economic development and demographic changes have also created an additional need for skilled labor. At the same time, greater integration into the EU, open borders and a common educational space led to the migration of Slovak students to the neighboring Czech Republic and other EU countries. As a result, Slovakia gradually began to ease migration restrictions and allowed an increasing number of third-country nationals to enter the territory of the Slovak Republic. The integration policy of Slovakia is consistent with the migration policy, and among its priorities is the effective integration of foreigners in the labor market. The purpose of the article is to analyze Ukrainian student migration in Slovakia, focusing on the analysis of personal and social benefits. We analyze the issue of academic mobility as an integral component of the European educational space, which also undoubtedly has a positive effect on the national education system and the national economy. We highlight the issue of effective ethnic-national policy formation, development of theory and practice of social work with ethnic groups, find out directions and forms of social service work with migrants. In the empirical part, we present a quantitative study at all stages of the research process. The content of the study is to find out the reasons that motivate future Ukrainian students to migrate to Slovakia, as well as to find out how the initial decision about migration and arrival to Slovakia takes place. Part of the quantitative research is the analysis of the personal and social benefits of the migration of Ukrainian students to Slovakia.

Foreign Investments and Energy Transition in the Netherlands

Affordability, competitiveness, security of supply, and sustainability are among the goals set for the field of the energy transition for 2030 through 2050. In order to meet these goals, the energy sector of the European Union (EU) will require a continuous inflow of capital, particularly Foreign Direct Investment (FDI). Unfortunately, FDI has raised severe national security concerns in EU Member States, leading to the need to adopt and subsequently revisit the FDI screening framework on the EU level. On a domestic level, several EU Member States, such as the Netherlands, have either strengthened or are considering strengthening their screening mechanisms. States have been screening FDI on national security grounds for decades, but the scope of new mechanisms has dramatically expanded to cover more sectors, transactions, and types of investors. In particular, FDIs that affect energy infrastructure, supply of energy, raw materials, dual-use items, and critical technologies necessary for the energy transition should be subjected to more rigid scrutiny. These regulatory and policy developments might hinder the flow of investments into the energy sector and the advancement of new technologies and thus have implications for the prospects and speed of the energy transition in Europe. This Article will discuss the overarching question of how states can organize their investment screening mechanisms in a way that balances their national security interests against the need for free flow of FDI to stimulate development of technologies that accelerate the energy transition. This includes a case study of the FDI policy of the Netherlands, one of the major destinations of global FDI. This Article initially distills the principles necessary to balancing competing security and economic interests of host states in the investment law context. Based on such principles, it further examines the extent to which existing regulatory mechanisms in the Netherlands are adequate in addressing security concerns posed by FDI while continuing to attract investments in the energy sector and related technologies. Specifically, this Article aims to identify trends in investment screening in the Netherlands, reflect on their coherence with overarching EU investment policy objectives and the multilateral guidance on a good policy design, and discuss the potential implications of recent regulatory developments for the future of the energy transition in Europe. More broadly, this Article contextualizes the case of the Netherlands within the global movement of tightening control over FDI and explores the relationship between the investment policy of a State, on the one hand, and its objectives to combat climate change and safeguard energy security, on the other.

The Effects of Investment Treaties and Trade Agreements on FDI: The Case of Serbia

ABSTRACT This study explores the effects of Bilateral Investment Treaties (BIT) and Regional Trade Agreements (RTA) on foreign direct investment (FDI) inflows into Serbia, utilizing panel data for 2010–2021. The results indicate that both BIT and RTA independently exert positive impacts on Serbia’s inward FDI. Also, the interaction effects between BIT and RTA dummies and export/import variables on inward FDI are positive. This suggests that the implementation of BITs and/or RTAs fosters a complementary relationship between trade and FDI in Serbia as the predominant type of FDIs from partner states with which Serbia shares BITs and/or RTAs is vertical and export-platform rather than horizontal.

The determinants of Vietnam’s outward foreign direct investment: the push factors approach

In the context of integration, in addition to increasing foreign capital inflows, Vietnamese enterprises are becoming more and more interested in outward foreign direct investment activities. This research expands the Investment Development Path model to assess the influence of some macroeconomic factors (GNI per capita, the proportion of expenditure on science and technology, FDI flows, USD to VND exchange rate, total import-export turnover) on Vietnam's outward foreign direct investment (OFDI) flows. Using the 32-year dataset (1989-2020), the regression results depict that the proportion of expenditure on science and technology, the amount of FDI, GNI per capita had a positive impact on the capital OFDI of Vietnam. However, the growth rate of total import-export turnover harmed OFDI flows in the same period. Meanwhile, the difference variable of exchange rate USD to VND in the multiple regression model was not statistically significant. Based on regression model results combined with qualitative studies, the authors propose some policy implications to promote OFDI flows of Vietnam in the near future.

Factors Influencing Foreign Direct Investments Inflow in Africa: A Case Study of Tanzania

Africa has emerged as an attractive destination for foreign direct investment (FDI) due to its rich natural resources, growing economies, and increasing political stability. The doors of Tanzania, one of the largest countries in Africa, have been opened to international companies in search of growing markets. Nevertheless, Tanzania has seen a low level of foreign direct investment (FDI) inflows, primarily because of its stringent policies restricting the ownership of businesses by foreign nationals. The aim of this study is to identify and explain the factors that influence FDI inflows in Tanzania, which is the country that will be the focus of the study. This study will concentrate on the independent factors of political stability, availability of natural resources, size of the economy, and transport infrastructure, as well as the dependent variable of foreign direct investment (FDI). To collect the appropriate information, five survey questions were developed for each variable. A total of 125 respondents were collected using purposive sampling. The findings of this study will inform policymakers, investors, and other stakeholders in the region about the factors that influence foreign direct investment inflows into Tanzania. The study examined the impact of transport and infrastructure, political stability, the scale of the economy, and the availability of natural resources on foreign direct investment (FDI) in Tanzania.

Foreign Direct Investment and Economic Development: An International Perspective

Abstract The present study examines the patterns of foreign direct investment (FDI) in Kazakhstan and draws comparisons with global trends. Based on statistical data spanning from 2000 to 2022, the study reveals that the growth of FDI in Kazakhstan has exhibited greater volatility and speed compared to developed nations. However, it is strongly associated with global FDI inflows and the growth of gross domestic product (GDP). This article aims to examine the patterns and determinants influencing FDI in Kazakhstan and to juxtapose these patterns with global trends. The main approach used in the study was systematic. The article’s contribution lies in its provision of novel insights into the dynamics of FDI in Kazakhstan and its correlation with economic growth. Furthermore, the article elucidates the various factors that contribute to the expansion of FDI in Kazakhstan, while also offering suggestions for the development of public policy in this domain. The article provides a comprehensive examination of FDI patterns in Kazakhstan, comparing them to global trends and identifying the factors that influence the dynamics of FDI. Furthermore, the article offers suggestions for expanding the economic base of Kazakhstan beyond its reliance on the oil and gas industry, enhancing focus on high-tech and innovative sectors, and enhancing the institutional framework.

SUSTAINABILITY ISSUES OF FOREIGN DIRECT INVESTMENTS IN AZERBAIJAN: IN TERMS OF DIVERSIFICATION

This research aims to analyze the correlations between the inflow of foreign direct investment and several macroeconomic factors in Azerbaijan. In order to examine the relationship between macroeconomic factors such as gross domestic product, export, import, and foreign direct investment outflow on foreign direct investment inflows, a multiple regression model was used. The study focused on the time period from the fourth quarter of 2010 to the fourth quarter of 2022. The study's results indicate that gross domestic product, imports, and outflow of foreign direct investment have a positive impact on foreign direct investment inflows. Conversely, exports have a negative impact on foreign direct investment inflows.

Analysıs of Foreıgn Direct Investment Policies and of the Performance of FDI Flows into Türkiye

The purpose of this paper is to overview Foreign Direct Investment (FDI) policies and legal framework over the years in Türkiye and analyze the performance of FDI inflows to the country by using total and sectoral FDI data over the period 1970-2022. With the recognition of positive spillover effects of FDI in bringing foreign exchanges, as well as new technologies, managerial and marketing skills to domestic industries, Türkiye opened its economic activities to foreign capitals by adopting liberal FDI laws and regulations in 1980, 1989, 2003 and 2012. Our study shows that immediately after these years, both aggregate FDI inflows and their sectoral distributions in Türkiye has changed dramatically. For instance, after the implementation of the FDI law in 2003, the service sector attracted the most of total FDI inflows.

Nexus between carbon dioxide emissions, population, migration, foreign direct investment, and gross domestic product: New evidence in the context of Vietnam

This research investigates the complex interplay between carbon dioxide emissions, population dynamics, migration patterns, foreign direct investment, and gross domestic product in Vietnam. The paper uses the unrestricted fixed and random panel data method. The data is collected from the World Bank and Vietnam General Office of Statistics. This study employs a multidimensional analytical framework in the country's rapid economic growth context, combining quantitative and qualitative methods to unravel the nuanced relationships within this nexus. The main finding of this study reveals significant correlations between carbon dioxide emissions, population, migration, FDI- foreign direct investment inflows, and GDP- gross domestic product growth, highlighting the pivotal role of these factors in shaping Vietnam's economic landscape. The study draws on comprehensive datasets spanning multiple years. The research reveals significant correlations, notably the positive link between foreign direct investment inflows and gross domestic product growth. Simultaneously, the study sheds light on the environmental challenges associated with urbanization and the socioeconomic impacts of internal migration. The findings of this paper contribute to the theoretical understanding of these interconnected factors, emphasizing the need for an integrated policy approach. Policy recommendations include sustainable urban development strategies, sector-specific foreign direct investment initiatives, and inclusive migration policies. Additionally, fostering green technologies, community engagement, and international collaborations are proposed to advance Vietnam's sustainable development goals. This research is a foundation for policymakers, scholars, and stakeholders, offering actionable insights to guide Vietnam toward a balanced and resilient future. The study's methodology, findings, and policy implications contribute to the academic discourse on sustainable development and provide remarkable guidance for navigating the complexities of economic growth and environmental stewardship in emerging economies.

Global Goods and Services Tax: A Macro-Economic Perspective

This article provides a comprehensive analysis of the global implementation of Goods and Services Tax (GST) to understand the diverse GST models adopted and examine their impact on key economic indicators. Through a detailed analysis of GST frameworks in selected countries such as Australia, Canada, India, Maldives, New Zealand and Singapore. The study analyses common trends and differences in tax structures, registration processes and the treatment of exempted goods and services. The findings of the study reveal a consistent pattern of increased tax revenue and GDP growth post-implementation of GST. Additionally, the study explores the impact of GST on trade dynamics, employment levels, foreign direct investment (FDI) inflows and savings rates across these nations. While the impact on inflation varies among the countries. Overall, the findings highlight the importance of well-planned implementation of GST as it is a crucial tax reform contributing to economic growth and stability on a global scale.

A Comparative Assessment of the Contribution of Foreign Direct Investment to Economic Development of Nigeria and Ghana

Generally, sub-Saharan countries suffer setbacks in regard to capital accumulation necessary to sponsor investment demands, thus promoting economic development. As a result, they look out for foreign sources such as foreign direct investment (FDI) to augment the investment-saving gap. Recently, due to global shake-ups and uncertainty, there has been a drastic fluctuation in the level of FDI inflow into the West African sub-region, especially in the two giant economies of Nigeria and Ghana. This attracted the attention of this research work. Thus, this study comparatively reassesses the contribution of FDI inflow to the economic development of these giant economies from 1980 to 2020 to determine which one of them benefits the most given the fluctuation in FDI inflows. The outcome reveals that FDI inflows have a significant influence on the economic development of both economies. In Nigeria particularly, evidence shows a strong positive correlation between FDI and Gross Domestic Product Per Capita (GDPPC), implying that the Nigerian economy is investment-driven in the period under consideration. Essentially, the Nigerian economy can achieve its desired development with FDI support. Similarly, findings indicate that FDI inflows into Ghana have a strong positive impact on economic development. Thus, a recommendation is made for the Ghanaian government to source more foreign resources by opening her economic borders wide for global integration. Pursuance of trade liberation policy for the purpose of attracting more foreign resources is critical to the attainment of sustainable economic development in both economies. Policy actions enabling stable macroeconomic conditions and a peaceful environment for smooth investment operations are key factors guaranteeing economic development.

The impact of China railway express on foreign direct investment inflows in Chinese central and western cities

Capital needs transportation channels. Following successful communication and cooperation with Central Asian and European states, the China railway express (CRE) has been built by central and western cities. This new international freight service will greatly enhance the transport conditions in the central and western cities. Therefore, it is necessary to conduct an in-depth analysis of the impact of CRE operations on foreign direct investment (FDI) flows in the central and western regions. For analyses, a panel data of 152 Chinese cities from 2008 to 2020 is used and staggered difference in differences (DID) model is applied as a quasi-natural experiment. The results demonstrated that the operation of the CRE had a positive and significant impact on FDI inflows in the central and western cities, particularly in western cities, large cities, and non-resource based cities in China. Mechanism analysis shows that CRE operations can enhance the ability to attract foreign investment in the central and western regions through the promotion of industrial agglomeration and the expansion of market size. Therefore, the government should actively optimize the layout of CRE transportation routes and establish an inter-regional coordinating mechanism for freight sources, thus allowing the radiating effect of CRE central cities to reach out to peripheral cities.

The relationship between foreign direct investment and financial inclusion in MENA countries: Evidence from the General Method of Moments

The study delves into the nuanced interaction between foreign direct investment (FDI) and financial inclusion in the MENA region, spanning the years 2003 to 2022 and employing the General Method of Moments for rigorous analysis. Its primary objectives are to elucidate how financial inclusion influences FDI and to examine the mediating role of economic growth and inflation as key factors. Key findings reveal a robust positive correlation between financial inclusion and FDI inflows within MENA countries. Specifically, the study uncovers significant relationships between FDI and the various dimensions of financial inclusion, including access, availability, and usage. This underscores the pivotal role of inclusive financial systems in attracting foreign investment. Moreover, the study highlights the symbiotic relationship between economic growth and FDI, indicating that heightened levels of economic prosperity attract greater investment. This underscores the importance of fostering conducive economic conditions to attract foreign capital. Furthermore, the study underscores the critical role of financial inclusion in shaping monetary policy and mitigating investment risks. By facilitating access to capital and reducing uncertainty, financial inclusion promotes transparency and stability, thereby enhancing the attractiveness of foreign markets for investment.

Foreign Direct Investment, Export and Economic Growth: An Evidence from Nepal

The aim of this paper is to analyze and evaluate the present status of foreign direct investment (FDI) in Nepal concentrating economic growth and export boost. Developing nations like Nepal derive significant advantages from foreign investment, fostering economic advancement through the attraction of external capital, entrepreneurial skills, expanding market spaces, and technology transfer. Nepal has witnessed an upsurge in FDI since the 1990s, primarily attributable to the implementation of liberal economic policies by the government. The enactment of the Foreign Investment Technology Transfer Act (FITTA) has further sustained the investment environment in Nepal. This paper analyzes and evaluates the role of FDI in driving Nepal's economic growth and export activities. Employing correlation analysis and an ordinary linear regression model, the impact of FDI on Gross Domestic Product (GDP) and exports is measured. Given the documented FDI inflows since the 1990s, this research concentrates on the period from 2010/11 to 2022/23 to measure FDI's impact. The findings of this investigation reveal a positive correlation between FDI, GDP and the country's export growth.

The relationship between CO2 emissions and macroeconomics indicators in low and high-income countries: using artificial intelligence

AbstractThis paper aims to unravel the driving forces behind carbon dioxide emissions in low- and high-income countries by applying gradient boosting and random forest algorithms. The study reveals that gradient boosting demonstrates superior accuracy over random forests in low-income countries, whereas the opposite pattern is observed in high-income countries. Additionally, the study demonstrates that, according to the gradient boosting algorithm-based feature selection, the major influencers of carbon dioxide emissions in low-income countries are the agriculture sector (49.9%), the industry sector (17%), the services sector (10.4%), population size (9.8%), gross domestic product growth (7%), and foreign direct investment inflow (5.3%). Furthermore, random forest algorithm-based feature selection reveals that, in high-income countries, the key drivers of carbon dioxide emissions are the services sector (30.8%), the agriculture sector (27.1%), the industry sector (21.5%), population size (19%), foreign direct investment inflow (1.2% - A different working methodology than low-income countries), and gross domestic product growth (0.4%). Moreover, the study corroborates that low carbon dioxide emissions in low-income countries correlate positively with industrial sector growth, foreign direct investment inflow, gross domestic product, and population size but negatively correlate with the agricultural and service sectors. In the case of high-income countries, carbon dioxide emissions positively correlate with foreign direct investment inflow, industrial and agricultural sector growth, and gross domestic product while exhibiting a negative correlation with population size and service sector growth.

Free zones and manufactured export competitiveness from Africa

AbstractThis study analyzes the effect of free zones on the competitiveness of manufactured exports from Africa. Particular interest is devoted to the channels through which free zones affect export competitiveness. The empirical analysis covers a sample of 29 countries for the period 1996–2018. Using panel data techniques, the results show that the free zone has a positive and significant effect on export competitiveness. The main transmission channels identified are foreign direct investment inflow, human capital, and institutional quality. As the main policy implication, policymakers in Africa need to invest more in human capital development and improve the attractiveness of the investment environment as a priority for having productive free zones.

Do foreign direct investment inflows affect tax revenue in developed and developing countries?

PurposeThis study aims to examine the effect of foreign direct investment (FDI) inflows on tax revenue in 34 developed and developing countries from 2006 to 2020.Design/methodology/approachFeasible generalised least squares (FGLS), a dynamic panel of a two-step system generalised method of moments (GMM) system and a pool mean group (PMG) panel autoregressive distributed lag (ARDL) approach were used to compare the developed and developing countries. Basic estimators were used as pre-estimators and diagnostic tests were used to increase robustness.FindingsThe FGLS, a two-step system of GMM, PMG–ARDL estimator’s results showed that there was a significant negative long and positive short-term in most countries relationship between FDI inflows and tax revenue in developed countries. This study concluded that attracting investments can improve the quality of institutions despite high tax rates, leading to low tax revenue. Meanwhile, there was a significant positive long and negative short-term relationship between FDI inflows and tax revenue in the developing countries. The developing countries sought to attract FDI that could be used to create job opportunities and transfer technology to simultaneously develop infrastructure and impose a tax policy that would achieve high tax revenue.Originality/valueThe present study sheds light on the effect of FDI on tax revenue and compares developed and developing countries through the design and implementation of policies to create jobs, transfer technology and attain economic growth in order to assure foreign investors that they would gain continuous high profits from their investments.

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.

Modeling the influence of mineral rents and low‐carbon energy on environmental quality: New insights from a sustainability perspective

AbstractIn recent decades, the detrimental impacts of climate change have been increasingly felt worldwide. This is due to the extreme consumption of natural resources to fuel economic activity. Confronting a widening ecological deficit, humanity must urgently accelerate its journey toward sustainable development goals (SDGs). This demands active efforts to curb environmental pollution and protect natural resources, safeguarding the planet for future generations. Since Brazil has high biocapacity and ecological areas, the impact of energy resources on ecological sustainability policies cannot be excluded. Moreover, Brazil holds a vital position in the world for global foreign direct investment flows. In this regard, this paper considers the asymmetric impact of mineral rents and foreign direct investments when investigating Brazil's environmental sustainability. In addition, it evaluates elements like economic growth and low‐carbon energy consumption from 1970 to 2021. To this end, the research applies the Fourier nonlinear autoregressive distributed lag model and draws three significant conclusions. First, resource extraction undermines environmental sustainability. Second, the inflow of foreign direct investment reduces the load capacity factor, implying that the pollution haven hypothesis holds for Brazil. Third, low‐carbon energy consumption contributes to environmental sustainability. Our findings highlight the critical role of regulating mineral resource rents in achieving SDGs in Brazil. Moreover, increasing investment in clean energy sources and transitioning toward low‐carbon energy can promote sustainable development in Brazil. The Brazilian government should abandon mineral extraction, focus on low‐carbon energy consumption, and prevent companies from destroying nature by introducing strict environmental regulations for foreign investment flows.