Importance Of Foreign Direct Investment Research Articles

FOREIGN CAPITAL FLOWS, FINANCIAL DEVELOPMENT AND GROWTH IN SUB-SAHARAN AFRICA

1. INTRODUCTIONOrthodox development perspective quite apparently delineates an important role for capital flows from richer countries as a critical component of the much-needed development finance requirement in the developing world. This North-South capital kinesis paradigm, while encompassing diverse categories of capital - portfolio investment, remittances, foreign direct investment (FDI), and official development assistance (ODA) among others - recognises the prominence of foreign direct investment, relative to other sources, as a key predictor of economic growth. In 2004, for example, FDI accounted for one half of total resource flows to developing countries, while remittances, ODA and portfolio equity split, albeit not equiproportionally, the remaining half (World Bank, 2011). This seems particularly apposite since foreign direct investment both in its conception and composition examplifies the necessary long term ingredients required to nurture growth which in itself is a phenomenon observable chiefly over comparably long horizons.However, there are conflicting opinions not only on the importance of foreign direct investment (FDI) on economic growth but also on the channels. FDI can positively affect growth by an outward shiftin the economy's production possibilities frontier through technology transfer and the attendant spillovers (Blomstrom et al, 1994; Kokko and Blomstrom, 1995). The former underscores the importance of all categories of investment, particularly FDI, in maintaining the economy on a sustainable growth trajectory. For instance, most sub-Saharan Africa (SSA) countries witnessed systematic declines in investment rates from the early 1980s with corresponding negative growth rates in real output till around 1990 in some cases (Oshikoya, 1994). Therefore, since FDI flows to these countries ranked amongst the lowest to developing countries, it suggests close ties between low investment and the observed economic downturn in SSA during this decade that has been tagged lost.While the positive influence of FDI on growth remains in large part an empirical regularity, a crucial issue that is by far less clear regards the channels through which the positive impact of FDI on economic growth works (Lemi and Asefa, 2003). A prominent view that has emerged in this discourse is that the absorptive capacity of the FDI-receiving country matters. Interestingly though, this absorptive capacity has been looked at under different prisms. For instance, Balasubramanyam et al, (1996) and Borensztein et al, (1998) see the domestic economy's trade as well as human capital policies as the prerequisite for FDI's growth-promoting effects, while De Mello (1997) focused on the importance of physical capital accumulation. Likewise, there are equally a number of other somewhat complimentary opinions along the lines of market size, natural resource endowment amid a host of other factors.In more recent studies, however, research focus appears to have shifted to the role of the recipient economy's financial sector in the FDI-Growth nexus (see Hermes and Lensink, 2003; Alfaro et al, 2004 for elaborate narratives). There are at least three distinct merits to emphasize this shift. First, deeper and broader based financial institutions through more efficient delivery of financial services serve to promote growth directly (Levine, 1997; Errunza, 2001). Second, advanced financial systems by construction are better positioned to attract foreign direct investment which is a vital predictor of growth (Albuquerque, 2003). Third, increased financial sector efficiency should lower transaction costs which are chiefly related to perceived risks arising from information asymmetries (Reisen and Soto, 2001).While this study is similar in spirit to this latter strand of evidences, we tread a distinct path on a number of fronts. First, the link between FDI and economic growth and the influence of financial development is delved into within a SSA-specific panel context. …

Why hasn’t Macedonia succeeded for a long time in absorbing Foreign Direct Investment

Recently almost all countries of the world without exception developed countries or the developing countries are attracting foreign direct investments. The reason is that there is no dilemma that benefits of foreign direct investments in the host countries as well as domestic countries are greater than the damage that can have.Western Balkan countries also follow this trend for attracting foreign direct investment. Some of them have achieved notable successes, while the others have achieved less success. Macedonia is a country that during the last two decades ranks among the countries with smaller foreign direct investments.In the paper which I have chosen to analyze, in the start I gave a general overview of the meaning, role and importance of foreign direct investments for economic development of a country. Later I have analyzed the trend of foreign direct investments in the region, and especially in Macedonia. At the end sought and given reasons of locking foreign direct investment in Macedonia and recommendations to overcome such a situation.

Multilateral Agreements on Investment: Lessons from the Past and the Road Ahead

A multilateral agreement on investment (MAI) is an agreement between sovereign states which is meant to safeguard the investments that companies undertake in foreign countries. Given the importance of foreign direct investment, one would expect to find such an agreement on the top of every international organization’s agenda. The OECD started negotiations for such agreement in 1995 and the newly established WTO set up a working group in 1996 regarding the same. At that time, however, those attempts failed. The negotiations at the OECD were suspended in 1998 and the WTO did not move beyond TRIMS, the Agreement on Trade-Related Investment Measures that is limited, to the subset of trade-related investments. The study traces the history of International Investment Agreements, along with their features, advantages and disadvantages. The paper takes at the chronology of the events which led to the failure of MAI. The analysis concludes with the road ahead for multilateral agreements on investment.

The importance of foreign direct investments in Sumadija and Pomoravlje region

The terms of foreign investment and foreign direct investments are very often terms in foreign economics policy because they represent one of the key issues in foreign economics and practice. The relationship between investments and economic growth is the key question in the modern economic theory. Foreign direct investments are representing the most common shape of international capital movement wich are including the long term connections between more differents countries, regions. The Sumadija and Pomoravlje Region is located in the central Part of Serbia. This Region is the heart of Serbia. Economic development of this part of Serbia is important for the economic development of the whole Serbia as a country. It is very important for the longrange economic growth to define strategy for economic growth for the region of Sumadija and Pomoravlje. In this strategy we will determine the most important tasks and objectives of economic growth also the incentives in the ten year period to come. In the transition country which is Serbia with huge regional and economical problems, without its own funds it is important to attract foreign investment, first of all direct investment. Foreign direct investment which are the basics of all investments in Serbia especially in Shumadija and Pomoravlje region.

The importance of foreign direct investment for South East European countries' agriculture

The importance of foreign direct investment for South East European countries' agriculture

Regional Features of Attracting Foreign Investments into the Russian Economy

Aspects of investment attractiveness of subjects of Russian Federation, where the mode of Special Economic Zones (SEZ) is applied, are reviewed in this article. Emphasizing the importance of foreign direct investment for overcoming the technological gap from the leading world economies, the authors discuss several SEZs selected for reasons of uniformity of their socio-economic status and purpose of creating SEZ mode in them. One of the main purposes for establishing the SEZ mode is the creation of investment attractiveness for projects, being implemented in these regions. Special Economic Zones of Technical Innovation Type (Tomsk), industrial type (Samara, Ulyanovsk, Elabuga) are analyzed in this article because these are the types of SEZ modes where borrowing is supposed, as well as introduction and development of modern technologies. In large-scale projects planned by the Government in these areas, participation of small businesses is almost ignored, which, from the point of view of the authors, harms the investment attractiveness of the projects. Identification of regional special characteristics of investment attractiveness of studied objects is carried out in comparison with the state of small business in these areas. Importance of small business development in the creation of a favorable investment climate is shown.

Contemporary trends in global foreign direct investment flows

It is not necessary to explain the importance of foreign direct investment, particularly in less developed countries, bearing in mind the numerous theoretical and empirical papers that confirm their importance and effects that the inflow of these investments in the country can make. The movement of these investments on the global level is characterized by significant changes, especially in recent years, in their volume, geographically distribution as well as in the conditions in which they take place - conditions of instability and crisis interruptions, growing regional and interregional integration and altered foreign direct investment policies. Trends in their movements are mirrored in individual countries, stressing on the need for their continuous monitoring and detailed analysis. Therefore the paper will identified the key trends that characterize the contemporary global flows of foreign direct investments.

Napływ zagranicznych inwestycji bezpośrednich i ich oddziaływanie na gospodarkę Węgier

At the turn of century the paradigm of economic development has been changing. Despite the economic instability in the world the process of globalization has not been stopped. The importance of growth factors included in the area of R&D (research and development) increased. These two aspects are also important in the analysis of the economic transition in Central and Eastern Europe (CEE). Factors from R&D area are now perceived as the key conditions for creating knowledge -based economy and for sustainable development. There should also be noted low potential of CEE countries to generate investments in modern sectors of economy based on R&D. In this context, there is increasing importance of foreign direct investment (FDI) as an indirect instrument for strengthening the modernization process of economic structures and providing the basis for sustainable development. In this paper the subject of analysis is the influx of FDI in Hungary and their impact on the economy of the country in the period 1989–2012. The paper also attempts to answer the question on relations between the level and characteristics of the inflow of FDI and structural changes and economic development in Hungary.

Foreign direct investment and policy framework: New Granger causality evidence from African countries

The strategic importance of foreign direct investment in the contemporary economies has been tremendous.While various countries (developed and developing economies) have benefitted from the direct and spillovereffects of FDI, which range from improved technology and knowledge diffusion through to individual andcorporate capability enhancement, FDI outflow remains largely channelled to the developed countries, andthe rapidly developing countries in Asia and South America. Evidence suggests that the developmentenhancingeffects of FDI are felt more highly in the developing economies, such as economies in Africa.However, FDI inflow to the developing economies has been very low. Using data generated from the AfricanDevelopment Indicators (ADI) between 1980 and 2008 in econometric estimations, this paper finds thatgovernment policies (especially fiscal and monetary policies) play significant roles in facilitating FDI inflow tothe African countries studied. The study thereby suggests an improved regulatory framework to make Africamore attractive to inflow of FDI.

Foreign direct investment in tourism, poverty alleviation, and sustainable development: a review of the Gambian hotel sector

Despite the growing importance of foreign direct investment (FDI) in tourism for developing countries and its perceived developmental importance, there are few empirical impact studies. This paper explores tourism FDI and poverty alleviation through both the literature and a detailed review in The Gambia of the relative contribution of foreign versus locally owned hotels to development and poverty alleviation. Data was collected via an in-depth questionnaire with senior hotel management and through key informant interviews with tourism officials and stakeholders. The study provides empirical evidence of the relative characteristics, performance, and benefits of foreign investments, suggesting that different forms of hotel ownership have complex advantages and disadvantages for poverty alleviation. FDI was concentrated in larger, upmarket hotels, which tended to employ more staff, pay higher wages, and provide more training. However, they had a lower proportion of women employees and employment was more likely seasonal. They have more high-skilled positions, potentially offer staff mobility, but have more expatriates in management roles. Local food purchases were similar across hotel ownership types, as were local philanthropic initiatives, although there were differences of approach. Some resident foreign owners were involved in successful best practice community-linked businesses, driven by social service and environmental ethics.

Productivity spillovers from foreign direct investment in the Brazilian processing industry

The increasing importance of foreign direct investment (FDI) to international production has prompted considerable interest in its real effects on host economies all over the world. The aim of this study was investigate whether the presence of FDI produces productivity spillovers in Brazilian processing industries. We conduct our analysis using a panel database on twenty-three Brazilian processing industries and applied Moderated Multiple Regression (MMR) and Generalized Linear Models (GLM) analysis of variance to address potential spillover effects from foreign presence. This paper finds evidences of the coexistence of both positive and negative effects arising from FDI on the productivity of Brazilian industries. We found negative effects for FDI presence in labor-intensive industries. Furthermore, FDI benefits depend on the absorptive capacity of industries, confirming the hypothesis that a minimum level of absorptive capacity is required so that locally owned enterprises (LOEs) can benefit from foreign presence.

A Small Macro Econometric Model for Kazakhstan: A Retrospective of Alternative Economic Policies Undertaken During the Transition Process

This paper presents a quarterly macro econometric model of the Kazakhstan. The main goal is to provide a stylized representation of the Kazakh economy in order to simulate the consequences of several economic policies viewed by the authorities as essential during the period of transition to a market economy. The policy simulation potential of the model is illustrated by five types of simulations: interest rate shocks, foreign direct investment shocks, world oil price shocks, foreign demand shocks and nominal wages shocks. These sets of simulations show the importance of foreign direct investments in terms of theirs global positive effect, as well as the demand effect of an increase in the wages. We also find that effect of the tight monetary policy in not ambiguous; we argue that in some cases it is not the most efficient policy instrument to sustain the economy.

Comparative analysis of factors that encourage foreign direct investment in Serbia and Romania

The importance of foreign direct investment, FDI in rapid economic recovery and further development of Serbia and Romania encouraged the study of these issues in particular through trend research in FDI inflows over the past years, analyzing their structure and sectoral distribution, description of the investment environment and investment incentives. Since 2007, Romania became a full member of the EU and Serbia in 2012 was granted candidate status for membership, thus these countries have become very attractive investment destinations. By applying desk method and method of content analysis in order to collect relevant research data as well as by using descriptive and comparative research methods, defined general and specific research hypotheses will be tested. The scientific problem highlights the importance and many advantages of FDI as one of the most desirable forms of foreign capital investment in Serbia and Romania, and discovers the factors that attract foreign investors in the mentioned countries and lead them to make an investment decision. The subject of this study is to investigate the movements of FDI over the past twenty years, their structure by economic activities, different factors of geographic, economic and socio-political nature which affect the attractiveness of the analyzed countries as investment destinations as well as tax and non-tax incentives which have a strong impact on foreign investors in choosing investment destination. The main objectives of this research are establishing economic sectors that have so far attracted the largest number of foreign investors, highlighting the similarities and differences in tax and non-tax investment incentives among the analyzed countries as well as comparison of trends in Serbia as a candidate for EU membership with the European averages by highlighting key elements that make both analyzed countries attractive investment destinations.

The Fundamental Importance of Foreign Direct Investment to Australia in the 21st Century: Reforming Treaty and Dispute Resolution Practice

This paper outlines our collaborative research project for 2014-16, aimed at evaluating the economic and legal risks associated with the Australian Government’s recent approach to investor-state dispute settlement (ISDS), and broader implications for Foreign Direct Investment (FDI) and international investment law particularly in the Asian region. The multidisciplinary research will include econometric modeling, empirical research through stakeholder surveys and interviews, as well as critical analysis of case law, treaties and regulatory approaches. The aim of this project is to identify optimal methods of investor-state dispute prevention, avoidance and resolution that efficiently cater to inbound and outbound investors as well as Australia as a whole. The goal is to promote a positive climate for investment inflows and outflows, while maintaining Australia's ability to take sovereign decisions on matters of public policy.

The effect of foreign direct investment on the use and success of US sanctions

Although the relationship between trade and the use and success of sanctions is frequently studied in international relations, researchers have generally failed to address the importance of foreign direct investment (FDI) on sanctions despite global capital markets dwarfing the exchange of goods and services. Using panel data for 171 countries from 1971 to 2000, we test the effect of FDI on the use and success of sanctions imposed by the USA. We find evidence that a high level of economic engagement in the form of US FDI as a percentage of the recipient county’s gross domestic product reduces the likelihood of the use of US sanctions. We also find that, when sanctions are imposed, declining US FDI generally has a positive and significant effect on sanctions success. However, if non-US firms offset lost US FDI, the probability of sanctions success decreases. The results show that investors may have an important influence on foreign policy outcomes.

FDI in ASEAN-8: Does institutional quality matter?

The importance of Foreign Direct Investment (FDI) as a driver of economic development is no longer a secret. As a result, the competition to attract FDI is getting stiffer as any economy in the world is currently eyeing for FDI, including the Association of Southeast Asian Nations (ASEAN). With the emergence of China as a new attractive location for FDI, and as part of the alternatives to further enhance the attractiveness of ASEAN, this study analyses the role of institutional quality on FDI inflows into ASEAN.

Impact of FDI on India's GDP: An Inter- Comparative Study Between USA, UK and Japan

Considering the growing importance of Foreign Direct Investment (FDI) in the present day well-knitted economic environment, this empirical study compares the impact of FDI inflows from Japan from those of United States of America (U.S.A.) and United Kingdom (U.K.) on India's gross domestic product (GDP). The paper, by using sample data of FDI and India's GDP from 1st April 2002 to 31st March 2011, makes use of Correlation and multiple regression for studying relationship between the variables. Moreover, t-test is being employed to test whether the results are significant or not. The results conclude that FDI from the respective countries individually do not significantly affect India's GDP.

A small macro econometric model for Kazakhstan: a retrospective of alternative economic policies undertaken during the transition process

This paper presents a quarterly macro econometric model of Kazakhstan. The main goal is to provide a stylized representation of the Kazakh economy in order to simulate the consequences of several economic policies viewed by the authorities as essential during the period of transition to a market economy. The policy simulation potential of the model is illustrated by five types of simulations: interest rate shocks, foreign direct investment shocks, world oil price shocks, foreign demand shocks and nominal wages shocks. These sets of simulations show the importance of foreign direct investments in terms of theirs global positive effect, as well as the demand effect of an increase in the wages. We also find that effect of the tight monetary policy is not unambiguous; we argue that in some cases it is not the most efficient policy instrument to sustain the economy. Copyright Springer Science+Business Media New York 2014

Foreign Direct Investment and Institutional Adequacy: New Evidence from African Countries

The strategic importance of foreign direct investment in the contemporary economies has been tremendous. While various countries (developed and developing economies) has benefitted from the direct ...

An Econometrics Analysis of Foreign Direct Investment on Economic Growth in Nigeria.

This study investigates the Econometrics analysis of foreign direct investment (FDI) on economic growth in Nigeria for the period of 1985-2010. it examines the importance of foreign direct investment (FDI) as a source of financing for development in Nigeria and investigates the channels through which it benefits the economy. An extended Cobb Douglas production function is used whereby investment is disaggregated into two different types' namely, domestic private investment and foreign direct investment for more comparative analysis. This research work is similar to numerous empirical studies and conclusions in Nigeria on FDI and its importance to economic growth. The study employs recent techniques in time series econometrics namely Co- Integration, Error Correction Model (ECM) to determine the long and short run term impact of foreign direct investment on economic growth as well as the ordinary least techniques to estimate our equation for the period under study. The funds that FDI overall contribution is significant and has a negative effect on Nigeria's economic growth. This is based on the fact that Nigeria has not been able to absorb the knowledge and technical spillover effect of foreign direct investment inflow into the country. However FDI fails to augment human capital development due to the low level of existing human capital in the country and there is need for more emphasis on training to enhance its potential to contribute to economic growth, factors such as political and macroeconomic instability, low growth, weak infrastructure, poor governance, inhospitable regulatory environments, and ill-conceived investment promotion strategies, are identifies as responsible for the poor FDI record in Nigeria. Examining the constraints to improve contribution of FDI to the growth process, the study concludes that it will require an appropriate mix of proactive government policies to direct FDI to priority sectors of the economy; effective enabling environment to make Nigeria an attractive FDI host.