Increase In Foreign Direct Investment Inflows Research Articles

Impact of intellectual property rights on foreign direct investment in Africa

The study investigated the impact of intellectual property rights on foreign direct investment (FDI) in selected African countries (Burkina Faso, Ivory Coast, Nigeria, Cameroon, Mali, Kenya, Burundi, Central African Republic, Rwanda, Senegal, Zimbabwe, and Tanzania). The purpose of the study is to develop property rights policies that encourages FDI in African countries. How FDI is influenced by the combination of trade openness and intellectual property rights was also examined using the same data set and econometric methods such as the dynamic generalized method of moments (GMM), fixed effects, and pooled ordinary least squares (OLS). Panel data ranging from 2005 to 2019 were used for the purposes of this study. A 1% increase in intellectual property rights led to a 22.73% increase in FDI inflows under the dynamic GMM and a 45.55% increase in FDI inflows under the random effects. These results show that intellectual property rights significantly enhanced FDI under the random effects and dynamic GMM. FDI was insignificantly enhanced by intellectual property rights under the pooled OLS and fixed effects methods. A 1% increase in complementarity between intellectual property rights and trade openness (complementarity term) pushed up FDI inflows by 17.78% under the dynamic GMM, whilst a 1% increase in the complementarity term increased FDI inflows by 16.72% under the fixed effects. In other words, dynamic GMM and fixed effects approaches show that the complementarity component significantly improved FDI inflows. The paper recommends implementing the best property rights strategies to improve FDI inflows into African countries. AcknowledgmentThe author appreciates the moral support from the University of South Africa, his employer.

FDI in India: Analyzing Financial Flows and Economic Impacts

Foreign Direct Investment (FDI) plays a crucial role in shaping the economic landscape of India, attracting significant attention from investors, policymakers, and economists alike. As one of the fastest-growing economies in the world, India has been successful in improving its attractiveness to foreign investors through various policy reforms and liberalization measures. The study finds important patterns and connections in the dynamics of FDI inflow by applying quantitative analytical techniques such a regression analysis and correlation analysis. The results of regression analysis highlight the impact of the GDP on FDI inflow, showing a robust positive connection between GDP and FDI inflow. In recent years, there has been a substantial increase in FDI inflows into India across different sectors, such as telecommunications, manufacturing, and services. This surge in FDI can be attributed to the country's large and growing market, skilled workforce, improving infrastructure, and stable political environment. Analyzing the financial flows of FDI into India reveals that a significant portion of inflows comes from countries such as the United States, Singapore, and Mauritius. This diversification of funding sources indicates the global interest in investing in India and leveraging its potential as a key market in the region. The economic impacts of FDI in India are multifaceted and go beyond simply bringing capital into the country. FDI inflows contribute to job creation, technology transfer, skill development, and overall economic growth. Foreign investors bring in expertise, best practices, and access to new markets, which can benefit local industries and enhance competitiveness. Moreover, FDI inflows can also lead to improvements in productivity, efficiency, and innovation within domestic firms through spillover effects. However, it is essential to recognize the challenges associated with FDI in India, such as regulatory complexity, infrastructure bottlenecks, bureaucratic inefficiencies, and socio-political factors. Addressing these challenges requires continuous efforts from the government to further streamline regulations, improve infrastructure, enhance the ease of doing business, and foster a more investor-friendly environment. Keywords: Foreign Direct Investment (FDI), Regression, Correlation, GDP, Telecommunications.

Causes of Restrictiveness Policies on Foreign Direct Investment in OECD and Non-OECD Countries

Foreign direct investment (FDI) is considered a significant tool to transform modern technologies and innovation from developed to developing countries. Unfortunately, some countries impose FDI restrictions for economic, political, and social reasons. The present study assesses the role of different restrictive policies on FDI inflows in OECD and non-OECD countries. The empirical results are estimated by using panel quantile regression (PQR) at the median quantile from 1998 to 2022. It uses the all-restrictiveness policies index and its four subtypes: equity, key foreign personnel, screening and approval, and operational restrictions; the data is extracted from the OECD database. The study concluded that all restrictiveness policy indexes and their subtypes in OECD countries propose the inverted U-shaped curve. In contrast, in non-OECD countries, it shows the U-shaped relationship to determine the FDI inflows. Furthermore, this study also examines the individual countries using the marginal effect. In OECD countries, Australia, Canada, Mexico, and New Zealand have imposed higher restrictions, which reduces the FDI, while in non-OECD countries case, China, Indonesia, Malaysia, and the Philippines imposed higher restrictions, which increased FDI inflows. This study recommends that OECD countries reduce the FDI restrictiveness policies while non-OECD countries should increase it.

Does foreign direct investment promote access to basic services? The case of drinking water in Africa

AbstractAddressing the challenge of limited access to drinking water requires a comprehensive understanding of its underlying causes. This study aims to evaluate the effect of foreign direct investment (FDI) on access to basic services in Africa, focusing specifically on people's access to drinking water. Utilizing data from a panel of 51 countries spanning the period 2000–2020, we employed a two‐step system generalized method of moments to estimate dynamic econometric models. Our analysis reveals a positive correlation between FDI inflows and improved access to drinking water. A one‐percentage point increase in FDI inflows leads to a 0.026 percentage point rise in the proportion of people with access to drinking water. Notably, the effects vary between urban and rural areas, with marginal effects of 0.022 and 0.160, respectively. Furthermore, our findings indicate an inverse U‐shaped relationship between FDI and access to drinking water in Africa, signifying that while access to drinking water improves with increasing FDI, the rate of improvement diminishes. The study recommends the judicious utilization of tax revenues from multinational enterprises to fund basic service infrastructures and advocates for measures aimed at attracting additional FDIs.

Attaining global peace and tourism competitiveness: linkages between tourism, security measures and economic stability

PurposeThe Sustainable Development Goal (SDG) 16 outlines sustainability as associated with peace, good governance and justice. The perception of international tourists about security measures and risks is a key factor affecting destination choices, tourist flow and overall satisfaction. Thus, we investigate the impact of armed forces personnel, prices, economic stability, financial development and infrastructure on tourism.Design/methodology/approachThis research used data from 130 countries from 1995 to 2019, which were divided into four income groups. This study employs a two-step generalized method of moments (GMM) technique and a novel tourism index comprising five relevant indicators of tourism.FindingsA 1% increase in armed forces personnel expands tourism in all income groups – 0.369% High Income Countries (HICs), 0.348% Upper Middle Income Countries (UMICs), 0.247% Lower Middle Income Countries (LMICs) and 0.139% Low Income Countries (LICs). The size of the tourism-safety coefficient decreases from high to low-income groups. The impact of inflation is significantly negative in all panels, excluding LICs. The reduction in tourism was 0.033% in HICs, 0.049% in UMICs and 0.029% in LMICs for a 1% increase in prices. The increase in the global tourism index is more in LICs (0.055%), followed by LMICs (0.024%), UMICs (0.009%) and HICs (0.004%) for a 1% expansion in the gross domestic product (GDP)/capita growth. However, the magnitude of the growth-led tourism impact is greater in developing countries. A positive impact of foreign direct investment (FDI) inflow was found in all panels like 0.016% in HICs, 0.050% in UMICs and 0.119% in LMICs for a 1% increase in FDI inflow. The rise in the global tourism index is 0.097% (HICs), 0.124% (UMICs) and 0.310% (LMICs) for a 1% rise in the financial development index. The increase in the global tourism index is 0.487% (HICs), 0.420% (UMICs) and 0.136% (LICs) for a 1% rise in the infrastructure index.Research limitations/implicationsEmpirical analysis infers important policy implications such as (a) establishment of a peaceful environment via recruitment of security personnel, use of safe city cameras, modern technology and law enforcement; (b) provision of basic facilities to tourists like sanitation, drinking water, electricity, accommodation, quality food, fuel and communication network and (c) price stability through different tools of monetary and fiscal policy.Originality/valueFirst, it explains the effect of security personnel on a comprehensive index of tourism instead of a single variable of tourism. Second, it captures the importance of economic stability (i.e., economic growth, financial development and FDI inflow) in the tourism–peace nexus.

Institutional Quality, Foreign Direct Investment and Sustainable Economic Growth in Emerging African Economies

Foreign direct investment (FDI) is an essential determinant of development for Africa. It encourages sustainable economic growth. However, in most African economies, quality of institution plays a vital role in enhancing the inflow of FDI. The objective of this study therefore is to examine the effect of institutional quality, foreign direct investments on sustainable economic growth in emerging African economies. The study employed pooleddata for 8 African countries (Nigeria, Botswana, Ghana, Kenya, Mozambique, Tanzania, Uganda and Zambia) using the panel data methodology for the period within the years 1990 and 2020. The paper adopted the fixed effect regression model based on the results of the Hausman test in estimating the effect institutional quality, FDI inflows and sustainable economic growth in emerging African economies. The variables of the model included; GDP per capita GDPPC, foreign direct investment FDI, domestic investment DOMINV, corruption perception index CPI, political stability POLSTAB and exchange rate EXR. The study found and concluded that using panel fixed effect, institutional quality, (proxy with corruption perception index CPI and political stability POLSATB) and FDI both have a significant relationship with sustainable economic growth in emerging African economies. The study therefore recommends that Governments in these nations need to create and encourage a conducive environment that will increase FDI inflows in the various sectors of the economy since the results of the study have shown its growth enhancing capability. Control of corruption and political stability has shown to aid and encourage the entrenchment of rule of law, democracy and justice. Corrupt tendencies need to be reduced to the barest minimum. Exchange rate stability is to be pursued vigorously and attained in other to attract investments (domestic and foreign)

Empirical Relationship between Foreign Direct Investment and Economic Growth: Evidence from Nepal

Background: Foreign direct investment (FDI) is vital for developing countries like Nepal to access foreign capital, drive economic growth through technology transfer, open new investment and research opportunities, and harness their abundant natural resources. With Nepal experiencing a capital shortage, FDI plays a crucial role in bridging the resource gap and stimulating economic activities in the country.
 Objective: The study examines the relationship between FDI and economic growth, gross domestic savings (GDS), trade openness, as well as the impact of policy (liberalisation) and security variables in Nepal.
 Methods: The study employs data from secondary sources, such as the Nepal Rastra Bank, the Ministry of Finance, and the Central Bureau of Statistics, along with a database on the Nepalese economy from 1996 to 2019. The study utilises the Autoregressive Distributed Lag (ARDL) model for the evaluation and interpretation of the results.
 Results: The findings of this study demonstrate a positive and statistically significant relationship between Real Gross Domestic Product (RGDP), Real Gross Domestic Saving (RGDS), and Trade Openness (Xm) with Foreign Direct Investment (FDI) inflow in Nepal in the long run. Likewise, the Liberalization Policy positively affects FDI, although it lacks statistical significance. However, the presence of poor security conditions during the civil war exerts an adverse impact on FDI inflow.
 Conclusion: The empirical analysis provides compelling statistical evidence supporting the claim that Trade openness and RGDP positively impact FDI in the long run. It signifies the potential of FDI as a significant resource capable of contributing to economic growth, with trade openness facilitating the inflow of FDI in the economy. Furthermore, Gross Domestic Saving appears to be a significant determinant of FDI, as it fosters capital formation within the economy, ultimately promoting increased FDI inflows. Likewise, the success of FDI attraction in Nepal is contingent upon effective Liberalisation and Privatisation policies alongside a stable political environment, which collectively play pivotal roles in facilitating and sustaining FDI inflows.
 Implications: The study suggests that policymakers should focus on the timely reformation of economic policies and should pay close attention to providing security and ensuring an investment-friendly environment. The government should encourage increased savings through the better facilities of financial institutions and promote international trade and infrastructure development.
 Keywords: FDI, Gross Domestic Savings, Economic Growth, Trade Openness, ARDL
 Paper Type: Research Paper

Technological proximity of countries as a factor of inward foreign direct investment to developing economies

Over the past decades, incoming flows of foreign direct investment (FDI) to developing countries have increased significantly. However, the share of accumulated incoming direct investments of these countries in the global volume of incoming direct investments remains unchanged. This may indicate the shortterm nature of these investments due to the lack of investors’ motivation to make long-term investments in these countries. In our paper, we make an attempt to identify the most significant determinants of flows of inward foreign direct investment to developing countries based on statistics on bilateral flows of such investments for the period of 2009—2021. For this purpose, we have constructed a gravity model of foreign direct investment. In contrast to the previous studies we have focused on the factor of technological proximity between countries. Firstly, the estimation results allow us to conclude that technological proximity between a recipient country and an investor country has a significant impact on the volume of FDI inflows to developing countries. Secondly, this influence is heterogeneous. The proximity of the technological structure of exports between countries contributes to an increase in FDI inflows to a recipient country. At the same time, countries which are close to each other in terms of the level of technological development of exports have a smaller volume of mutual FDI, while a significant excess of the level of technological development of the investor country over that of the recipient one is a factor of additional FDI inflows driven by a resource-seeking motive. Thirdly, based on the obtained results, we have revealed a list of countries that are the most attractive for Russia in terms of increasing the volume of outward FDI.

The impact of FDI on economic growth in developing countries: the role of FDI inflow and trade openness

This study examines the relationship between foreign direct investment (FDI) inflow, trade openness, and the influence of FDI on economic growth. The threshold methodology and GMM estimation are employed to analyze panel data from 60 developing countries in the period between 1995 and 2019. This study demonstrates the positive impact of FDI on economic growth in developing countries. However, the study also finds a significant threshold of FDI inflow relative to GDP that changes the impact of inward FDI on GDP growth. Regarding the role of trade openness, a significant threshold is found, which also indicates the absorptive capacity of the host countries. Moving from below to above this threshold, an increase in FDI inflow leads to a lower increase in economic growth. An increase in FDI relative to GDP stimulates growth only when the host country has sufficient absorptive capacity with regard to trade openness above the threshold. We suggest developing countries tighten the coherence of trade liberalization and FDI attraction policies to obtain the benefits of FDI and make changes to attract new investors when they succeed in attracting massive FDI inflows.

Pengaruh Variabel Makroekonomi terhadap Investasi Asing Langsung di Indonesia

This study aims to analyze the short-term and long-term relationships between macroeconomic variables and the flow of Foreign Direct Investment (FDI) in Indonesia from 1982 to 2021. The analysis model used is johansen-juselius co-integration and error correction model (ECM. This study found a cointegration relationship between macroeconomic variables and FDI inflows. Money supply is a factor that influences FDI inflows in the short and long term. Meanwhile, inflation and trade openness have a negative effect in the long term. Market size affects FDI inflows only in the short term. This finding has implications that the government needs to maintain the stability of macroeconomic variables to increase FDI inflows.

Examining the Effect of Foreign Direct Investment and Economic Activities on Urban Land Expansion in Transitional Vietnam

Despite abundant literature studies on the economic impact of foreign direct investment (FDI) on developing countries, few studies have investigated the impact on spatial urbanization. This study explored the spatiotemporal distribution of FDI inflows and its impact on urban land expansion in Vietnam, a transition country in Southeast Asia. While previous research was limited to specific case studies due to data limitations, this study used panel data from provincial-level regions nationwide on FDI inflows and urban land change between 2000 and 2018. The study applied panel and spatial panel models to examine the direct and indirect impact of FDI on urban land growth in the host and neighboring provinces. FDI inflows in Vietnam were most prominent in the manufacturing and real estate sectors and spatially concentrated in the metropolitan regions and coastal areas. The estimated model revealed that an increase in FDI inflows positively affected urban land expansion in the host province and that regions had spatial autocorrelation and were spatially grouped. On the other hand, it negatively affected urban land expansion in neighboring provinces. The results showed that the positive effect of FDI was significant in provinces with high-rank FDI inflows compared to surrounding areas. However, in some provinces with relatively small inflows of FDI, the negative indirect effect is greater than the direct effect, and urban land expansion may decrease due to FDI into neighboring provinces. This result implies that FDI inflows have influenced deepening regional disparities in urban growth. It needs an institutional response for regional management of the economic and environmental spillover effects of FDI inflows.

SCENARIO OF FOREIGN DIRECT INVESTMENT IN INDIA DURING COVID-19

Foreign Direct Investment (FDI) is cited as one of the most strategic tools for a developing economy as it brings in market discipline by increasing competition. In addition, there is a growing demand for products and services that are available across the world. Due to India’s increasing working population with higher purchasing power there is an increasing demand for products and services that are best in class. The covid-19 pandemic has set the international financial system into a downturn which means the global economy has begun shrinking whereas India has no exemption. Nowadays India has emerged as one of the most preferred destination for FDI. The covid-19 pandemic has put international investor confidence in India to the test. The basic aim of the study is to examine the effect of Covid-19 in Foreign Direct Investment in India. The trends of FDI inflows have been monitored to compare pre and post Covid-19 period. The results reveal in 2020 has worst effect, while after that, due the revised FDI policy and India’s internal capability to attract international investors, increase in FDI inflows have been observed. FDI is considered as a positive factor of the economic expansion could play a key part in assisting the economy in the time of crisis. KEYWORDS: Foreign Direct Investment, Covid-19 pandemic

Host country’s financial condition and FDI inflow: evidence from China

PurposeThis paper investigates how the gap between the host country's actual and optimal financial conditions affects foreign direct investment (FDI) inflows through evidence from China.Design/methodology/approachThe authors first employ principal component analysis (PCA) to measure FDI target countries' actual financial conditions and use 30 OECD countries as a reference group to assess the optimal financial condition. The authors then estimate a two-way fixed effect model with panel data of China's outward FDI in 64 countries for the period 2003–2017 to get the regression results. The authors' results overcome endogeneity and are robust.FindingsResults show that (1) the gaps between host countries' actual and optimal financial conditions positively affect FDI inflows from China; (2) there is a heterogeneous effect between low-income and high-income countries. The gaps for high-income countries significantly increase FDI inflows from China, while the gaps are not significant for low-income countries.Research limitations/implicationsThe authors examine how the gap affects FDI inflows from China. An increase of 1% in the target country's gap promotes a 6.3% increase in FDI inflows. However, the authors do not explore what mechanisms are key to these results. The authors will explore these questions in the future.Originality/valueThis paper complements the influence factors of FDI and enriches theories of FDI. The gap between actual and optimal financial conditions plays an essential role in FDI flows across countries for policymakers.

Determinants of FDI Inflows: Bounds Testing Approach

Nowadays, heightened academic interest in foreign direct investment (FDI) inflows derives from a shift in host-country policymakers' perspectives on encouraging and attracting more FDI, which would generate possibilities and assist developing nations in achieving sustainable development. This study analyzes the determinants of FDI inflows in Sri Lanka using secondary data from 1978 to 2019. We used the Autoregressive Distributed Lag (ARDL) bound testing procedure to examine the long-run relationships between variables. The result revealed that the gross domestic product (GDP) growth rate positively affects FDI inflows to Sri Lanka. A higher GDP paves the way to higher market size, leading to more FDI in Sri Lanka. Openness to trade also positively impacts foreign FDI inflows into Sri Lanka, and this effect is statistically significant. It means that trade liberalization policies implemented since 1978 have increased FDI inflows into Sri Lanka. The exchange rate has a significantly positive impact on FDI inflows to Sri Lanka.

Inward FDI, IFRS Adoption and Institutional Quality: Insights from the MENA Countries

The adoption of International Financial Reporting Standards (IFRS) by 166 countries since 2004 has been a major achievement in the international standardization of accounting regulations. The present paper draws on the Eclectic Paradigm as the analytical framework to investigate the effects of IFRS adoption on foreign direct investment (FDI) inflows. The analysis is conducted based on panel data from 22 Middle Eastern and North African economies (MENA) between 1996 and 2019. The findings indicate that FDI inflows are positively associated with IFRS, and countries implementing the accounting standards receive a higher increase in FDI inflows. Furthermore, the results show that institutional quality plays an important role in attracting FDI. These results remain robust using lag and time-fixed effect estimation methods. The findings have several implications for policymakers.

Corruption, FDI, and Trade Freedom Relationship Between Turkey and Latin American Countries

Foreign Direct Investment (FDI) has been always associated with a high level of trade openness and freedom environment, and with a lower incidence of institutional corruption. Because it is assumed that a high level of international capital mobility makes foreign investors more cautious when there is a fluctuation in political stability and institutional transparency. Most American countries (except Canada and the USA) have been always related to a lack of transparency in their institutional and bureaucratic procedures, which conduct to important levels of corruption and in consequence, to other serious issues such as prominent level of violence, or even the inequality phenomena. This study investigates whether the variables of corruption indices, trade openness and inflation rates have positive or negative effects on FDI between Turkey and American countries. For analyzing this econometric model, it was gathered information from OECD, COMTRADE, TUIK, Heritage Foundation, UNCTAD, and the World Bank Database. The observed data correspond to a decade (2005-2014) and were only taken a sample of 14 American countries.The empirical results of the present study revealed that there is a positive correlation between the trade openness index and FDI; and, it was found a positive correlation between corruption index, inflation, and FDI. The increase in the corruption index causes a 41% increase in FDI inflow.

Impact of Regional Economic Integration on FDI in SAARC Countries

Purpose: The empirical literature is inconclusive regarding whether some regions are more effective than others at attracting Foreign Direct Investment (FDI). The article aims to ascertain the effect of regional economic integration on FDI in SAARC member countries from 1998 to 2017.
 Design/Methodology/Approach: Mix research technique has been used. While qualitative research entails in-depth literature readings and reports, quantitative analysis entails presenting data via graphs and tables.
 Findings: Findings suggest a significant positive connection between FDI and regional integration in the SAARC economies. While regional integration has a vital role in increasing SAARC's share of global commerce, it has increased FDI inflows and its share in Asia and the world. As a result, while we cannot overlook both classic and non-traditional economic factors affecting FDI, regional integration may play a critical role in fostering FDI growth.
 Implications/Originality/Value: By boosting cross-border investment, regional cooperation will allow businesses, particularly those from smaller nations, to expand their size and capabilities to compete worldwide. It can also aid in increasing efficiency and reforming industries. SAARC countries must make significant progress toward integration.

The impact of FDI on income inequality in Egypt

This study examines the impact of inward foreign direct investment (FDI) on income inequality in Egypt over the period from 1975 to 2017. We find that a one per cent increase in FDI inflows (as a percentage of gross fixed capital formation) results in 0. 0188 reduction of the Gini coefficient. The finding is robust to different specifications of the empirical model and potential endogeneity of FDI inflows. The negative impact of FDI inflows suggests that Egyptian policymakers shall continue and strengthen the open-door policy, which has the added benefit of improving income inequality.

Spillover effects of corruption and democracy on territorial attractiveness of foreign direct investment in sub‐Saharan Africa

AbstractThis article aims to analyse the spillover effects of corruption and democracy on foreign direct investment (FDI) attractiveness in sub‐Saharan Africa. To accomplish this, a dynamic spatial Durbin model that allows identification of both the endogenous and contextual effects was estimated. The results of the analysis show the presence of spatial interdependence of FDI attractiveness in sub‐Saharan African countries. The spillover effects transiting through democracy push FDI to agglomerate, while corruption pushes FDI to disperse. Furthermore, we find a strategic complementarity in FDI inflows between the countries in sub‐Saharan Africa, suggesting that an increase in FDI inflows to a host country is likely to stimulate FDI inflows to its neighbours. Therefore, they must coordinate their policies to attract FDI by setting up non‐discriminatory incentives between countries to limit the costs linked to attractiveness policies.

Foreign Direct Investment in Nepal: Status and Way Forward

Foreign Direct Investment (FDI) has been used by developing countries as an important tool for economic development of the country specially to manage the resource gap between saving and investment, government revenue and expenditure gap, trade gap as well as to enhance knowledge, skill, trade, and entrepreneurship efficiency within the country. Inflow of FDI in Nepal started with the adaptation of economic liberalization since 1990 introducing investment friendly policies and institutions. This paper analyses the situation of FDI inflows in Nepal by various accepts such as country wise, sectors wise, scale wise investment based on available data from 2047 to 2078. It also highlights some of the challenges and the opportunities of FDI in Nepal and finally it has provided some of the recommendation for way forward to create investment friendly environment to increase FDI inflows. With its all prospects, the article argues that FDI is essential to manage the required resource gap for economic development of Nepal, and to graduate from LDC to developing country by 2030 which is one of the agendas of SDGs.