Foreign Direct Investment Inflows Research Articles

Behind the Withdrawal of Foreign Investment from India: In - depth Causes and Insights

In recent years, one of the most noteworthy events experienced by the Indian economy is the large-scale withdrawal of foreign capital. In 2023, a total of 2,783 foreign enterprises exited the Indian market, with divested capital aggregating to 2 trillion rupees. While foreign direct investment (FDI) has consequently increased on a territorial basis, there has been a steep decline in Indiaʼs FDI inflows to USD$28.163 billion in 2023 from its peak of USD$64.072 billion in 2020. This indicates some relationship between territorial rise or fall and regional factors. This article delves into the collapse of foreign capital in India, exploring the causes and offering benchmarks on how to address these circumstances. The analysis will cover various perspectives, including infrastructure development in India, lack of policy clarity for foreign investors, poor legal conditions, and socio-political factors, to identify the main reasons behind the cessation of foreign investments. Additionally, this article aims to provide both theoretical and practical guidance for formulating Indiaʼs future economic policies by comparing the flow of investment into India with other emerging economies like China.

Factors Affecting Traditional and Modern Services Imports in an Emerging Economy: The Role of Real Exchange Rate and Remittances Inflows

This study examines the effects of real exchange rate and remittance inflows on total, traditional and modern services imports in India using the autoregressive distributed lag (ARDL) bound testing approach from 1990 to 2020. Banking sector development, stock market development and net foreign direct investment inflows are controlled variables in the estimated services imports functions. The findings from the ARDL long-run model indicate that real exchange rate and remittance inflows inversely affect all service imports. Banking sector development and stock market development positively impact total and traditional services imports. In the case of modern services imports, the banking sector (stock market) inversely (positively) affects it. Net foreign direct investment inflows positively (negatively) affect modern services imports (traditional and total services imports). These findings suggest that policymakers in India should check the adverse effects of real effective exchange rates and remittance inflows on total, traditional and modern services imports. JEL Codes: F14, F31, F24, G21, G10, C32

A Dynamic Analysis of Sustainable Economic Growth and FDI Inflow in Saudi Arabia Using ARDL Approach and VECM Technique

This study investigates the relationship between sustainable economic growth and foreign direct investment (FDI) in Saudi Arabia from 1980 to 2023. The ARDL approach and VECM technique are employed to analyze the short-run and long-run dynamics. The short-run results show mixed effects. Sustainable economic growth has a positive impact on current and one-period lagged FDI but a negative impact on the two periods lagged. Trade openness and infrastructure negatively affect FDI in the short run. Interestingly, oil rents and real economic growth also have negative short-run impacts on FDI, but these effects become positive with a longer lag. Long-run analysis reveals a negative relationship between trade openness, infrastructure, and oil rents with FDI, suggesting a potential crowding-out effect. Trade openness has a positive long-run impact on most variables, including sustainable growth, FDI, real growth, and CO2 emissions. Oil rents also have a positive long-run impact on these variables. This study finds six bidirectional causal relationships in the short run, primarily between trade openness, infrastructure, oil rents, and FDI. Unidirectional causality runs from oil rents, trade openness, exchange rate, sustainable growth, and real growth to FDI and infrastructure. Additionally, CO2 emissions cause FDI, and trade openness causes sustainable growth. While sustainable economic growth benefits FDI in the long run, short-term policies regarding trade openness and infrastructure require reevaluation. Oil revenue and real economic growth may initially deter FDI, but this reverses in the long term. To attract sustainable FDI, policymakers should focus on long-term economic growth strategies and consider reforms in trade and infrastructure policies. A comprehensive FDI strategy that moves beyond oil dependence and leverages trade openness is crucial to long-term economic diversification.

Effects of Foreign Direct Investment Inflows to Economic Growth: a Case of Turkey

Objective: The purpose of this study is to investigate the effects of Tax Competition for Turkey, as well as the aspects of basic taxes like Personal Income Tax and Corporation Tax and evaluate the results. In this context, the impact of foreign direct investments on economic growth in Turkey is investigated. Theoretical Framework: Theoretically, it is accepted that foreign direct investment will positively affect economic growth. This study investigates the practical implications of this theory for Turkey. Method: International Comparative Analysis and various tables and graphics were used in this study to analyse the variance of Personal Income Tax and Corporation Tax by years. In addition study applies regression analysis on direct foreign inflow and economic growth in Turkey for 1974-2019 period. Results and Discussion: Regression analysis was performed on the time series of foreign capital investments and economic growth. However, it is concluded that foreign capital investments do not positively affect economic growth over the 1974-2019 period since foreign capital investments in Turkey reached their usual level only after 2002. Research Implications: This study concludes that foreign direct investment (FDI) does not always positively affect economic growth for all countries. Originality/Value: The study is original in that it shows that a generally accepted theory may have different results in practice for some countries.

Foreign Direct Investment and Military Expenditure in the Face of Terrorism: Evidence from Sub-Saharan Africa

This study examines the relationship between military expenditure and foreign direct investment (FDI) amid terrorism. The study used Mean Group, Pooled Mean Group, Dynamic Fixed Effect, and Panel Quantile estimations techniques on 23 terrorized countries in Sub-Sharan Africa from 1999 to 2019. The outcome of the estimate discovered that military expenditure in the absence of terrorism negates FDI flow. But, amid terrorism, military expenditure has a significant positive impact on FDI inflow. Also, the results show that the effect varies at different quantiles. The results are robust using death from terrorism attacks to measure terrorism on a different model. The study suggests that countries should desist from high military spending in the absence of terrorism to facilitate FDI flow. Countries in mid-life terrorism should enhance military spending and augment military strategy with other options to boost investors' confidence in the economy's high influx of FDI.

Comparative Analysis of FDI Inflow in Emerging Economies

This comprehensive document offers an extensive comparative analysis of Foreign Direct Investment (FDI) inflows in emerging economics, with a primary focus on key emerging countries. These nations have increasing attracted foreign investor seeking new growth opportunities. The BRICS group which includes Brazil, Russia, India, China, and South Africa, stands out as an important subject for this comparative study. The main objective is to gain comprehensive understanding of the foreign direct investment (FDI) inflow patterns is developing countries over the previous decade, emphasizing temporal trends and assessing the profound impact of FDI on their economic growth. The methodology employed in this research involves secondary data analysis utilizing information from reports by institution like the Reserve Bank of India (RBI), Macro Trends and the Ministry of Commerce. The study also includes an in-depth review of research papers, thorough and a meticulous analysis of FDI inflow data spanning the last 10 years. To gauge the influence of FDI on economic growth, a rigorous regression analysis is conducted. Emerging economies have increasingly become hotbeds for foreign investment, attracting capital from across the globe. Investors seeking to diversify their portfolios have taken notice of these countries because they present a multitude of growth potential. The BRICS group is unique among these rising economies because of its size, diversity, and potential for economic growth. Over the past decade, the BRICS nations have experienced significant shifts in FDI inflows, reflecting the evolving global economic landscape. This analysis clarifies the factors driving these investments and their effects on economic growth, with a focus on comprehending the long-term trends in FDI inflows to these nations. It is imperative that investors and regulators alike comprehend these trends. In addition to providing overall FDI inflow statistics, the analysis looks at the industries and geographical areas that have drawn in a lot of foreign capital. Moreover, it examines the evolution of policies and regulations in these countries that have played a pivotal role in shaping FDI trends. The central theme of this research revolves around assessing the impact of FDI on the economic growth of the BRICS nations. In order to do this, we measure the impact of FDI on these nations' economic performance using rigorous regression analysis. This empirical analysis helps us understand how much foreign direct investment (FDI) has contributed to economic growth and whether this contribution differs across the BRICS nations. Key words – FDI, BRICS, Inflow, economic growth.

The Effects of Foreign Direct Investment on Green Technology Innovation: New Evidence from China’s 278 Cities

ABSTRACT Foreign direct investment (FDI) has played a pivotal role in fostering economic development, and the FDI technology spillover effect is one of the core forces driving an open economy toward new green growth milestones. Evaluating the impact of FDI inflows on green innovation is essential for sustainable and environment-friendly city design. Based on the panel data of 278 cities in China from 2010–2019, we conducted an empirical analysis to test the impact and mechanisms of FDI on green technology innovation (GTI). The results demonstrate that FDI has a positive and highly significant effect on GTI. The channel analysis indicates that the FDI significantly stimulates urban GTI through two mechanisms: alleviating financing restraints and mitigating the risk of new GTI in the early stages. In the heterogeneity analysis, we find that the FDI effect is more pronounced in China’s resource-based regions with high levels of institutional and human capital and in regions with low-carbon pilot policies and good protection of intellectual property rights. Furthermore, the study shows FDI can affect GTI in neighboring areas through spatial spillover effects. Our findings underscore the importance of encouraging and sustaining internationalization in environmentally friendly sectors to foster green transformation. In essence, developing foreign investment policies and enhancing the green technology spillover effect of FDI are vital for strengthening GTI capacity.

Analysis of the Spatial Characteristics and Influencing Factors of Large-Scale Land Acquisition Projects in Southeast Asia

Southeast Asia is an essential region for companies carrying out large-scale land acquisitions (LSLAs). Exploring the distribution patterns and influencing factors of LSLA projects in this region is of great practical significance for summarizing the characteristics of LSLA projects in Southeast Asia, for gaining a thorough understanding of LSLA project development rules, and for formulating reasonable policies to guide local LSLA projects. This study explores the spatial distribution and influencing factors of LSLA projects in Southeast Asia using the mean center method, the kernel density estimation method, and the grey correlation method. The findings indicate the following: Firstly, the majority of LSLA projects in Southeast Asia are located in the Indo-China Peninsula, Cambodia, Myanmar, Laos, and other countries, which represent significant regions of interest for LSLA projects in this region. Secondly, the spatial distribution of LSLA intention projects and LSLA contract projects in Southeast Asia is similar, whereas LSLA production projects differ from the former two. Thirdly, the scale of LSLA projects in Southeast Asia is closely related to the host country’s natural resources, socio-economic conditions, governance, and market environment. The total GDP, per capita arable land area, net foreign direct investment inflow, and political stability have been identified as exerting a significant influence on investment corporations’ selection of LSLA host countries.

Investigating the links between civil war, peace and foreign direct investment: a case study of Sri Lanka’s tourism sector

ABSTRACT It is often assumed that civil wars impede foreign direct investment (FDI). Peace is therefore typically considered important for countries to attract FDI. However, scholarly evidence is inconsistent and has uncovered a complicated relationship between conflict and FDI. While studies have tended to focus on the extractive industries, this article investigates how conflict and peace can impact FDI in the tourism industry. Using Sri Lanka as a case study, the evidence suggests that the country’s civil war (1983–2009) inhibited inward flows of tourism FDI. Since the conflict ended, the tourism sector and tourism FDI rapidly expanded. However, the areas most affected by the conflict have seen limited growth in tourism and tourism FDI. High levels of militarisation – including military involvement in tourism – have stymied tourism in these areas. This suggests a more complicated relationship between FDI, civil war and peace than is typically recognised in the current scholarship.

The Impact of Foreign & Domestic Investment on Export Processing Zones in Bangladesh: An Auto Regressive Distributed Lag (ARDL) Approach

Foreign Direct Investment (FDI) is a major force behind the integration of the global economy and has the potential to boost economic development in both investing and those receiving the investment. The majority of the study focuses on the influence of FDI on Bangladesh’s economic growth. A number of scholars have also looked at how FDI affects trade, domestic investment and other economic sectors. But surprisingly less research has been done on the effects of FDI on Bangladesh's export processing zones (EPZs). This study tries to investigate the impact of foreign and domestic investment on exports of EPZs between 2011-2022. To investigate EPZs export, this study used the Auto Regressive Distributed Lag (ARDL) approach. The Wald test was used to determine the direction of causation. The ARDL estimate shows that investment, GDP and FDI all have a positive correlation with rising EPZ export. The coefficient for FDI inflows is 0.15% which suggests that if FDI inflows raise by 1%, EPZ export will grow by 0.15% while all other factors stay constant. It also shows that a 1% increase in investment leads to 1.32% quicker growth in EPZ exports, assuming all other factors remain constant. The Wald test demonstrates the bilateral causal relationship between EPZ export & FDI and the unidirectional relationship between EPZ export & GDP. Therefore, Bangladesh must take immediate measures to protect potential foreign investors in order to provide a welcoming environment so that they can feel their contribution in the Bangladeshi business industry is respected.

The effects of foreign direct investment on human capital accumulation—Evidence from China

AbstractThis paper examines the effect of foreign direct investment (FDI) on human capital accumulation in China. The identification strategy exploits variations in FDI inflows across manufacturing sub‐sectors caused by China's FDI liberalisation and initial sectoral composition patterns across cities. Using a panel of city‐level data from 1990 to 2005, the paper shows that FDI liberalisation accelerated human capital accumulation. Cities with higher exposure to FDI liberalisation experienced higher growth in high school and college enrollment. FDI incentivizes individuals' investment in their human capital by paying a higher wage premium for skilled workers, pushing up the skill premium in the local labor market, and raising household income. Compared to export‐oriented FDI and FDI in less‐skilled industries, market‐seeking FDI and skill‐intensive FDI have a much larger effect on college enrollment.

The Factors Affecting Foreign Direct Investment Intentions of Investors: A Case of Malaysia

Foreign direct investments (FDI) are regarded as one of the most important sources of external financing for all countries in this globalisation era. In recent years, Malaysia has only been successful in attracting a small number of foreign investors. As a result, the primary goal of this paper is to examine the factors that have attracted FDI into Malaysia from 1990 to 2020. The study investigates the relationships between FDI and the proposed explanatory variables, namely market size (GDP), trade openness (OPN), inflation rate (INF), and infrastructure (INFRA). Multiple Linear Regression (OLS) is used to examine the relationships between the variables. The Variance Inflation Factor and the Breusch Pagan Godfrey test are also analysed to discover the data collected from the World Bank Data. Findings indicate GDP and INF have a significant impact on FDI. This study has not brought any evidence of INFRA and OPN influencing FDI inflows in Malaysia. Understanding these factors is crucial for policymakers and investors to promote sustainable economic growth and attract foreign investments

Sustainable resource management and community corporate social performance: strategic implications of corruption control in MNEs

PurposeThe consequences of corporate corruption control (CCC) have either been investigated outside the firm (e.g. foreign direct investment inflows) or inside the firm (e.g. profitability). Yet prior research addresses these implications separately, treating them as distinct phenomena, ignoring questions at their intersection. However, corruption control can be leveraged to benefit both organizations (internally) and environments (externally). In line with open systems theory, this study aims to explore a ripple effect of corruption control not only inside organizations (efficiency through adoption of sustainable resource management practices) but also outside [community-centered corporate social performance (CSP)].Design/methodology/approachUsing a longitudinal sample of multinational enterprises from Forbes list of “The World’s Largest Public Companies,” the authors use a cross-lagged panel design to provide clarity regarding causal effects.FindingsResults confirm causal directionality and support the positive effect of corruption control on resource management and community CSP, contributing toward understanding implications at the organization–environment interface.Originality/valueThe authors examine both internal and external implications of CCC. The use of a cross-lagged design that is relatively novel to the management field allows to check for casual effects between CSP elements that were previously assumed to have reciprocal casual effects.

Does foreign direct investment affect domestic firms’ social security contributions?

Foreign direct investments (FDI) in developing countries are found to affect local domestic firms by introducing competition and spillover effects. This study investigates the effect of FDI on domestic firms’ social security contributions. It exploits China’s 2002 FDI liberalization and applies the difference-in-differences strategy for a causal identification. Using a Chinese firm-level dataset of the manufacturing industry, the estimates show that foreign investments have a positive effect on domestic firms’ social security contributions as a share of the wage base. The estimated effects are more pronounced in private firms, higher-wage firms, and firms facing lower contribution costs. Evidence also indicates that the increase in firms’ propensity to contribute plays an important role in explaining the overall increase in social security contribution rates. The promotion of social security compliance among domestic firms by FDI inflow suggests that market competition could be an attractive and effective approach to combating non-compliance with social insurance regulations.

Assessing the Impact of Sustainable Finance on Economic Growth: Evidence from India, the UAE, and Oman

The influence of sustainable finance on foreign direct investment (FDI), economic development, financial market stability, and economic stability in India, the United Arab Emirates, and Oman is investigated in this paper using a quantitative methodology. The study intends to evaluate the impact of sustainable finance on these factors via the use of standardized questionnaires that are distributed among participants in the financial industry. Structural Equation Modeling (SEM) using SPSS and AMOS was used for the investigation, which shows a favorable relationship between sustainable financing and both FDI inflows and economic development. The results show that the model fits the impacts of FDI well (CFI=0.973, RMSEA=0.069) and the effects of economic growth somewhat (CFI=0.946, RMSEA=0.102). Sustainable finance and economic growth are considerably mediated by financial market stability, while the connection between sustainable finance and foreign direct investment (FDI) is significantly moderated by economic stability (interaction path estimate = 0.075, p = 0.035). In order to maximize the advantages of sustainable finance on investment and growth outcomes, the research emphasizes the critical role that financial and economic stability plays.

A study on the spatial correlation network structure and its influencing factors of coupling coordination between FDI flow network and carbon transfer network in the belt and road initiative countries

Clarifying the spatial correlation characteristics and influencing factors of coupling coordination between Foreign Direct Investment (FDI) flow networks and carbon transfer networks in countries along the Belt and Road Initiative is of utmost importance for the formulation of regional carbon governance strategies and the establishment of a high-quality Green Silk Road. This study used a comprehensive approach combining social network analysis and coupling coordination model to measure the coupling coordination degree of FDI flow networks and carbon transfer networks of 67 Belt and Road countries from 2010 to 2016. In addition, a modified gravity model is used to characterize the spatial correlation network structure of coupling coordination between the two networks, and the QAP regression analysis method is applied to investigate the factors influencing the spatial association network. The results are as follows: 1) The spatial correlation network of coupling coordination between the two networks has good accessibility and relatively high overall network stability. 2) Countries such as Qatar and the United Arab Emirates occupy central positions in the network, while Bahrain and Jordan are positioned on the periphery of the network. 3) The spatial correlation network can be divided into three sectors: net outflow, net inflow, and bidirectional overflow sectors. 4) Spatial adjacency, bilateral investment treaties, economic development, and institutional quality have significant positive effects on the spatial association network, while the industrial structure and the level of infrastructure development have a significant negative impact. This study proposes an indicator system for the coupling coordination between FDI flow networks and carbon transfer networks. The aim is to investigate the coupling coordination relationship between FDI flow networks and carbon emission transfer networks in countries along the Belt and Road Initiative, providing important guidance for the formulation of regional cooperative carbon emission reduction strategies in other regions.

Analisis Pengaruh Kebijakan Moneter terhadap Perdagangan Internasional Indonesia

This study aims to analyze the impact of monetary policy on Indonesia's international trade using a literature review approach. The monetary policy implemented by Bank Indonesia, particularly concerning interest rates, inflation, and the exchange rate of the rupiah, significantly affects the performance of international trade. This study collects, evaluates, and synthesizes information from various relevant literature sources, including scholarly journal articles, books, research reports, and policy documents. The findings indicate that interest rates influence the competitiveness of export products through production costs, controlled inflation boosts foreign direct investment flows, and exchange rate stability supports long-term business planning and investment. Effective monetary policy can help create a stable trade environment, enhance the competitiveness of Indonesian products in the global market, and strengthen the country's economic position in the global supply chain.

FDI and their participation in global value chains: An analysis based on East Asia

Abstract Subject and purpose of work East Asia, particularly China, Japan, and South Korea has experienced rapid economic growth in recent decades, partly through active participation in global value chains (GVCs). Foreign direct investment (FDI) has played a crucial role in this process, enabling the transfer of technology and skills and access to international markets. This paper aims to empirically analyse the effects of FDI on GVCs in East Asian countries over the last two decades. Materials and methods The paper covers six East Asian countries from 2000 to 2022 and explores the relationship between FDI and GVCs using the Driscoll and Kraay (1998) estimator. The estimation techniques are ordinary least squares (OLS) and feasible generalized least squares (FGLS). Results The results reveal that FDI inflows into East Asia positively and significantly affect the countries participation in GVCs, both upstream and downstream. Conclusions These results suggest the need to support FDI in Asian countries to improve their participation in GVCs.

Endogenous Growth and Environmental Kuznets Curve: Lessons from FDI Impact on Economic Growth in Sub-Saharan Africa

Purpose: This study aims to determine the influence of Foreign Direct Investments (FDI) on economic growth in Sub-Saharan Africa (SSA). It examines the endogenous growth theory and the Environmental Kuznets Curve (EKC) theory, and how they relate to the regional data.Method: Using panel quantile autoregression models, this study explores the relationship between FDI inflows into SSA with energy consumption, carbon emissions, and economic growth. The study is based on data from 1975 to 2018.Result: The study findings conclusively demonstrate that foreign direct investment has a significant impact on the economic growth of the SSA region. Furthermore, the study reveals that energy consumption and carbon emissions in the SSA have consistently increased throughout the study period, with foreign direct investment being identified as the primary driver of this trend. These findings are consistent with the Environmental Kuznets Curve (EKC) hypothesis, as well as the endogenous growth theory, which suggests that FDI operations can have negative consequences on the host environment.Practical Implications for Economic Growth and Development: The study suggests that Sub-Saharan Africa should manage FDI carefully to balance economic growth with environmental sustainability by promoting green investments and creating an investment-friendly environment.

Empowering China's energy renaissance: Electrochemical storage strategies driving economic growth and policy evolution

This study presents an innovative framework to examine the interplay between foreign direct investment and economic development from 1996 to 2021. Using the Panel NARDL approach, our study provides an empirical framework for exploring these complex relationships. We enhance the reliability of our results by integrating additional methodologies, such as augmented mean group and common correlated effects mean group. A decline in carbon emissions is commonly hypothesized to be correlated with economic expansion, foreign direct investment inflows, advancements in renewable energy, and implementation of environmental technologies. On the contrary, detrimental disturbances have the potential to result in protracted ecological deterioration, especially in situations where there are setbacks in economic expansion and foreign direct investment. It is worth noting that although short-run and long-run coefficients exhibit comparable directional trends, there are discrepancies in their magnitudes and levels of statistical significance. This sophisticated comprehension empowers countries such as China, among others, to allocate resources strategically towards sustainable energy initiatives, promoting a systematic approach that prioritizes the adoption of renewable energy, advancements in technology, attraction of foreign investment, and transformation of structures.