Foreign Investment Inflows Research Articles

EXTERNAL DEBT AND FOREIGN INVESTMENT: AN EMPIRICAL ANALYSIS ON THE ECONOMY OF GHANA

This study considers the impact of Ghana’s heavy external debt on its ability to attract foreign investment. The study uses data covering the period from 1991 to 2019. Foreign investment is measured using net foreign direct investment inflows, while external debt is measured using two indicators: public and publicly guaranteed external debt stock and long-term debt stock. Using the ARDL, we found that both external debt indicators have a substantial negative long-run influence on foreign direct investment inflows. On the other hand, economic growth, measured by the gross domestic product, has a substantial positive effect on foreign direct investment inflows. External debt has a detrimental impact on foreign direct investment, while improvement in the country’s economic performance promotes foreign direct investment inflows. The implication is that when funds borrowed are well utilized for economic purposes, it will neutralize the negative consequences of the debt, and the improved economic performance shall augment foreign investment inflows. These findings are essential for most developing economies, especially the African countries, which heavily depend on foreign loans. Policymakers should focus on strategies such as human capital improvement, innovation, and strengthening their legal systems that improve economic performance.

An Empirical Investigation of Foreign and Domestic Portfolio Investment on Economic Growth in Nigeria

This paper empirically investigated the growth implications of foreign portfolio investment inflows and foreign portfolio investment outflows in Nigeria over the period 1986 to 2018. Secondary data sourced from the Central Bank of Nigeria (CBN) Statistical Bulletin, National Bureau of Statistics (NBS) and World Development Indicator (WDI) was used for examining the relationships among the endogenous variable and exogenous variables included in the model. The study employed Augumented Dickey Fuller (ADF) unit root test, Phillips-Perron (PP) unit root test, Johansen co-integration test, Ordinary Least Square (OLS) multiple regression technique to investigate the relationships among real gross domestic product (RGDP), foreign portfolio investment outflows (FPI), foreign portfolio investment inflows (DPI), exchange rate (EXGR) and inflation rate (INFR). Empirical findings revealed that foreign portfolio investment inflows (DPI) exerted statistically significant positive relationship with economic growth (RGDP) whereas foreign portfolio investment outflows (FPI) exhibited statistically significant negative relationship with economic growth (RGDP) in Nigeria over the studied period. Based on the estimated results, government at all levels in Nigeria should create enabling environment for the attraction of foreign portfolio investment inflows in order to spur economic growth; and monetary authorities in Nigeria should ensure stabilization of capital and money market activities with appropriate policies to sustain internalization and attractiveness to investors. Keywords: Foreign portfolio investment outflows, Domestic portfolio investment inflows, Economic growth, Ordinary Least Square Regression, Nigeria DOI: 10.7176/JESD/13-2-02 Publication date: January 31 st 2022

ДЕРЖАВНЕ РЕГУЛЮВАННЯ ІНОЗЕМНОГО ІНВЕСТУВАННЯ В УКРАЇНІ

The war, political and economic upheavals led to low investment activity, the curtailment of investment projects and the outflow of foreign investments from the Ukrainian market. In the conditions of the export of investment capital, without improvement of the investment policy and guarantees of capital security, business development and the inflow of foreign investments into Ukraine are impossible. Studying the specifics of state regulation of foreign investment activities will allow us to use the positive effects of foreign investment to improve the investment climate and develop investment infrastructure. The purpose of this article is to develop a system of measures to improve state regulation of foreign investments in Ukraine. The article examines the peculiarities of foreign investment activity in Ukraine. The scale of capital of non-residents in the economy of Ukraine is estimated. The following factors that reduce the country's investment attractiveness were identified: deployment of military operations in Ukraine; political and economic upheavals; significant withdrawal of foreign capital from the national economy; low activity of domestic investors under the influence of a number of macroeconomic factors; insufficient regulation of the investment process in Ukraine by the state; increasing internal and external debts. The shortcomings of the investment regulation system are identified: the inability of Ukraine to regulate legal relations and interests of investors with domestic legislation; ambiguous interpretation of provisions of legislative documents; a large number of regulatory acts that regulate the investment process; instability of national legislation in the field of investment; lack of guarantees of property rights of foreign investors; corruption in the investment sphere, etc. Measures to improve the regulation of foreign investments in Ukraine are proposed: harmonization of national legislation with the norms of international investment law; simplifying the procedure and shortening the terms of business registration and closing; introduction of control over the prevention of double taxation, currency exchange, admission to bank lending; providing regions with the necessary set of tools to increase investment attractiveness; decentralization of state regulation by attracting foreign investments into the economy of Ukraine. Key words: investment, foreign investment, direct foreign investment, investment infrastructure, investment climate, investment policy, state regulation.

РОЗВИТОК ІНВЕСТИЦІЙНОГО КЛІМАТУ В УКРАЇНІ В УМОВАХ ВІЙНИ

The article reveals key prospects for the development of the investment climate in Ukraine in wartime conditions. It was determined that the full-scale war in Ukraine is the main negative factor affecting Ukraine's investment attractiveness. The dynamics of direct and portfolio investments were considered and it was determined that the net inflow of direct foreign investments for eight months of 2022 is estimated at 47 million dollars USA. The directions for the development of the investment climate in Ukraine during the war and in the post-war period are singled out, in particular, it is envisaged to: unite the Personal Income Tax and Taxation and Establish a single rate of 25%; replace the income tax with a capital withdrawal tax; reform the tax system to create incentives for entrepreneurship and accelerate economic growth (subject to coordination with international partners in accordance with current international financial agreements in Ukraine); implement indicative planning for the implementation of the investment menu project; carry out privatization of non-strategic state assets; create conditions for insurance against the risk of war; provide real estate investment opportunities. It was determined that the state should support the development of the investment climate in Ukraine primarily through financial stimulation. To ensure this process, it is proposed to create the National Fund for Structural Transformation of the Economy. It was found that a unique electronic platform Advantage Ukraine has already been created to attract foreign investors to the Ukrainian economy. It was determined that in the future, Ukraine aims to create high-tech military-industrial parks thanks to European and world military technologies, to attract investments in the development of projects and the construction of military factories. It was established that during the war, Ukraine established itself as a legal state, demonstrating the coordinated interaction of institutions at various levels, aimed at preserving the state order and comprehensive support of all types of economic activity during this period.

Macroeconomic factors and emerging equity market: A contextual analysis using quantile regression

This article examines the role of macroeconomic factors in influencing Indian stock market movements across different market conditions. The study is important for market participants and policymakers as macroeconomic factors may be the source of systematic risk that influences the stock market. We employ factor analysis as a solution to the multicollinearity issues associated with multiple macroeconomic factors. Using three statistical factors built from macroeconomic factors, we show how they impact the stock market, particularly during up and down market conditions. While the influence of foreign exchange rate, broad money supply, economic growth, wholesale inflation, global equity markets, and export is positive and stable across market conditions, an inverse relationship between contemporaneous bond yield and equity market movements is evidenced. Gold and foreign institutional investment inflows seem to exert an increasingly negative influence on market movements at extreme up-market conditions. These findings call for active intervention by policymakers to stabilise the market during extreme market conditions

ІНОЗЕМНИЙ КАПІТАЛ В БАНКІВСЬКІЙ СИСТЕМІ УКРАЇНИ

A characteristic feature of the third millennium is the deepening of the globalization of economic processes and the integration of world financial systems, and the servicing of national economies by the banking system today cannot be done without the participation of foreign capital. Entry of foreign capital into the banking system of Ukraine has become an objective process of inflow of foreign investments. As world practice shows, the presence of foreign capital in the national banking systems of both industrialized and transition economies is an integral component of economic development The modern aspects of foreign investment in the transition period are analyzing in the article. In the conditions of globalization of the world economy, the attraction of foreign capital through the banking sector of the domestic economy has many advantages and plays a very important role. Studies conducted by World Bank experts claim that in most cases, the inflow of foreign capital into the banking sector can have a significant impact on the macroeconomic indicators of the entire economy. Taking into account the policy of Ukraine’s access to foreign investments, it can be said that the current policy of my country in this matter is quite flexible. In modern market conditions, in the conditions of war, the question of foreign investment in the Ukrainian banking sector is very acute and very urgent. The banking sector is stable and liquid, as it was before the crisis caused by the war. First, banks provide payment services to individuals and legal entities. Free business funds and a significant part of household savings are kept in bank accounts. These funds are used by banks to provide loans. The harmonious and uninterrupted operation of banks in wartime is more important than usual. The banking industry survived the first months of the war with minor losses thanks to the timely actions of the National Bank and banks to ensure the uninterrupted functioning of financial institutions. The economy continues to function and adapt to new conditions. Last but not least, this became possible thanks to the uninterrupted function- ing of the banking system. In the first hours of the large-scale invasion, the NBU introduced a number of measures that not only quelled panic among Ukrainians, but also restored trust in banks and increased account balances.

ВПЛИВ НЕДООЦІНЕНОГО ВАЛЮТНОГО КУРСУ НА ЕКОНОМІЧНЕ ЗРОСТАННЯ

n the case of growing global instability and vulnerability to external shocks in emerging markets, the analysis of exchange rates remains one of the priority areas of scientific research while state authorities ensure its stability. Moreover, due to market failures, weak institutions, and a high level of openness, the exchange rate is the “second best” tool for improving competitiveness and macroeconomic stability. In particular, many scholars believe that an undervalued exchange rate positively affects economic growth by improving competitiveness, increasing export earnings and facilitating the inflow of foreign investment based on the fundamental laws of international trade and capital flows. However, the empirical verification of the assumption often shows contradictory results. It requires a comprehensive analysis of the mechanisms, tools, potential consequences, and limiting factors of the positive impact of devaluation on economic growth, which is especially important because of the subsequent contraction of the hryvnia as impact of russian war. One of the most common factors for the mixed effects of an undervalued exchange rate is the specifics of each country: its sectoral structure, parameters of aggregate supply and demand, consistency of fiscal and monetary policies, and structural imbalances. The authors propose complementary measures within economic, financial, industrial, and innovation policies that complement and enhance the positive effect of an undervalued national currency on economic growth. In our opinion, such recommendations can be practical to form macroeconomic policy for the post-war recovery in the face of a likely weakening of the hryvnia and growing uncertainty in the future.

ТЕОРЕТИКО-МЕТОДИЧНІ АСПЕКТИ УПРАВЛІННЯ ЯКІСТЮ ПОСЛУГ ПІДПРИЄМСТВ ЗАЛІЗНИЧНОГО ТРАНСПОРТУ

The article summarizes the theoretical and methodological aspects of railway transport enterprises quality management. It is noted that today the processes of globalization and integration of Ukraine into the world economy require new approaches to managing the transport system of our country, as it has significant transit potential and one of the largest railway networks in Europe. Unfortunately, today the inability of enterprises in the industry to adapt to new conditions of transport due to the low quality of railway transport enterprises services. It is established that the viability of the entire economic complex of Ukraine and the national security of the state depend on the railway transport enterprises services quality. It is noted that in order to solve the problems of improving the quality of railway transport enterprises services, first of all it is necessary to attract significant investment resources, the lack of which led to inconsistency of domestic railway transport technical and technological level with European standards. Scientific and methodological approaches to the management of the quality of railway transport enterprises services are considered, which proved the need to combine the interests of public authorities, business and society, based on the internal resources of economic entities. It is noted that the presence of highly professional managers is a guarantee of improving the quality of of railway enterprises services, as the specifics of this industry makes special demands on staff. It is established that in order to implement the tasks of improving the efficiency of railway transport and the quality of services provided it is necessary to create statutory conditions that would stimulate the inflow of domestic and foreign investment in transport infrastructure projects, increase railway transport investment attractiveness by ensuring competitive environment and industry. It is concluded that solving the problems of railway transport enterprises quality management will allow to ensure quantitative and qualitative structural changes in the industry and gradually reach the world level.

Direct Foreign Investments in the Ukrainian Economy: State and Problems of Attracting

Investment is one of the main sources of sustainable economic growth of any country. A special need for investment, including foreign ones, is experienced by countries with economies in transition, to which Ukraine belongs. This article aims to analyze the state and dynamics of foreign direct investment and determine the sectoral structure of foreign direct investment in the national economy in the sectoral dimension to identify the problems and opportunities for investment development of Ukraine. According to the results of the analysis, it was found that the volume of foreign direct investment in Ukraine remains at a low level, and cannot affect the solution of problems related to the raw materials orientation and sectoral inefficiency of the national economy. Trends in attracting foreign direct investment to Ukraine are analyzed and the main factors slowing down this process are identified. These factors include the ongoing military conflict in the East of Ukraine, macroeconomic problems, political instability and low quality of institutions. It was found that, starting in 2018, there has been a gradual renewal of the interest of foreign investors in Ukraine. At the same time, it was found that foreign investments are directed mainly to less technologically and science-intensive industries and sectors of the economy. They account for about 60% of the total volume of foreign direct investment in the Ukrainian economy. It was emphasized that the priorities for national and foreign investment in Ukraine should be medium- and high-tech industries, which currently account for only a few percent in the total structure of foreign direct investment. To remedy the current situation, it is proposed to introduce tax and non-tax methods of investment incentives, among which industrial parks should take a special place as one of the most effective tools for attracting foreign investment in world practice. They contribute not only to the inflow of foreign investment, but provide many other advantages to countries and regions, including: the creation of new jobs, an increase in industrial production, the growth and diversification of exports, the attraction of foreign technologies and management practices, the development of high-tech industries. All these advantages and benefits from the creation of industrial parks are in need of Ukraine.

Is Democracy Necessary for Foreign Direct Investment Inflows in India?

India has developed a positive attitude towards the foreign direct investment (FDI) inflows during the last five years and made several changes in the market conditions, enhanced civil rights and liberties to attract more FDI inflows. This study examines the impact of democracy on FDI inflows in India by employing an autoregressive distributed lag (ARDL) model. For the said purpose, the study uses the annual data from 1980–2017. The findings demonstrate that the democratic setup does not induce FDI inflows in the short run, but there is a positive and significant impact of democracy in the long run. Furthermore, it confirms that gross national income per capita; trade openness, political rights, and civil liberties are significant and positive determinants of FDI inflows in India. Based on findings, this study recommends that India nurture democratic values, property rights security, and values of civil liberty & freedom to appeal for more foreign investment inflows into India progressively. JEL Codes: D73, C22, F14

Determinants of Foreign Direct Investment in GCC (Gulf Cooperation Council) Countries: Analysis of Economic Growth, Inflation, and Political Stability for the Period 2002-2018

AbstractPurpose – This research investigates the factors of foreign investment inflows (PMA) that are encouraged in the member countries of the GCC (Gulf Cooperation Council).Methodology - The sample selection for observations was based on six countries, including the United Arab Emirates (UAE), Kuwait, Qatar, Oman, Bahrain, and Saudi Arabia. The data for this study were obtained from the World Bank and Asian Development Bank (ADB) database for the period 2002-2018. This study adopts panel regression analysis and uses the Random Effect Model.Findings - This research reveals that GDP and Inflation are positive and play a significant role in driving FDI inflows in GCC countries. Meanwhile, Political Stability (PSAV) does not have a substantial impact on FDI inflows in the GCC countries. This study shows that the GCC countries must provide a conducive investment environment that is represented by higher GDP growth and is involved in various international trade agreements as these factors have a higher likelihood of impacting inflows FDI. Other than that, rules describing investment priorities among members should be ratified immediately to reduce the percentage of FDI inflows out of GCC countries. Thus, this research provides significant insights for policymakers for the GCC countries to attract FDI inflows into the country.Keywords: Foreign Direct Investment, Gulf Cooperation Council Panel Regression.

Political Communications in the Public Sphere Student Protest in Indonesia 2019-2020

The government and the parliament have decided to pass problematic bills, such as the Corruption Eradication Commission Bill (RUU KPK), the Criminal Code Bill (RUU KUHP), and the Omnibus Law (RUU Cipta Kerja) into laws. The reasons behind the passage of the bills irto laws are to make bureaucracy easier and facilitate foreign investment inflows to Indonesia. However, the decision-making process failed to involve elements of the community, such as academics, workers, working class, press, and related stakeholders. Consequently, students staged rallies to protest against the passage of the bills into laws in 2019 – 2020. This researchuses an approach qualitative methodology with a critical paradigm. The goal of critical theory is to change a reality that is always unbalanced and dominated.This research tries to encourage change towards a better society and emancipations. The data analysis technique comprises analysis of information sources from the mass media and analysis of research documents. The results of this study find that students had two strategic political communications during the protest. First, the social media movement sent hash tagged messages such as #Reformasidikorupsi #Gejayanmemangil and #Mositidakpercaya. Second, student staged demonstrations in front of the Presidential Place and the House of Representatives Building. When the government and parliament conspire with oligarchs to make policies to maintain power, then conflicts of interest with society, and student protests will be inevitable. As a result, the students have declared a motion of no confidence for parliament in a non-parliamentary participatory democratic system.

Russian stock market: Trends, challenges and solutions. Academic view

The slowdown of economic growth in Russia during 2000—2020 has been accompanied by decelerating domestic market growth and decline of its competitiveness indicators compared to other foreign markets. To some extent this evidence is associated with limitations of such development factors as favorable external economic conditions for raw materials and inflow of foreign investments. The intention to solve this problem by increasing state participation in economic processes and aiming financial regulation primarily at reaching financial stability goals has not led to any positive results in financial market development yet. The authors emphasize several key problems in this development including obstacles for longterm domestic savings growth, the unattractiveness of Russian issuers’ securities in terms of risk—return trade-off, the scarcity of quality issuers in listing, and the lack of competition between financial organizations. In response to these problems the authors propose applied recommendations that may be demanded when forming a long-term strategy for the development of the stock market in Russia.

Designing policy framework for sustainable development in Next-5 largest economies amidst energy consumption and key macroeconomic indicators

Global travel and tourism have enjoyed a significant boost due to the progress in air transport. However, the debate on air transport and the influx of foreign investments and global energy demand on economic development remains questionable. Therefore, this study is an attempt to contribute to the body of knowledge in the energy-tourism-led growth hypothesis literature. For this purpose, a novel approach to the effects of international tourism on economic growth is introduced for the Next-5 largest economies, namely (China, India, Indonesia, Turkey and the USA) between 1990 and 2018. Empirical results reveal a positive connection between foreign direct investment and income levels, electricity production and income levels, as well as between urbanization and economic growth. Moreover, the validation of the environmental Kuznets curve and the halo effect of foreign direct investment on the environmental degradation process provides a shred of more substantial evidence and fitting environmental instruments for policymakers. The empirical results encourage sustainable economic growth in these countries, mainly through the attraction of clean and high-technology foreign investment, the increase of the share of renewable energy sources in the energy mix and the regulation in the tourism industry. The novel contribution of this study to the empirical literature is the unification in the same research of the TLGH and the EKC for the Next-5 largest economies, establishing recommendations for tourism, energy efficiency and environmental correction process.

The Existing Problems In Attracting Foreign Investment To The National Economy And Ways To Overcome Them

The article analyses the importance of foreign investment and the existing problems in attracting them to the national economy and ways to overcome them based on statistics. The article also outlines the factors influencing the inflow of foreign investment and recommendations for their elimination.

Determinants of stock market liquidity – a macroeconomic perspective

ABSTRACT This study examines the impact of macroeconomic indicators on the liquidity of the Indian stock market by using the Granger Causality, Vector Auto-Regressive Model, and Impulse Response Functions. Numerous macroeconomic indicators were analysed at monthly and quarterly frequencies for their effect on the liquidity of NIFTY 500 stocks measured across four facets, i.e. depth, breadth, immediacy, and tightness. The study reveals that the tightness facet of liquidity is primarily affected by the indicators and further concludes that higher foreign investment inflows and gold prices impair the aggregate liquidity. In contrast, a surge in money supply strengthens the stock market liquidity.

Effectiveness of controlling foreign portfolio investment inflows using macroeconomic policy instruments and institutional strengthening (case study in Indonesia and Thailand)

This study analyzed the influence of macroeconomic and institutional variables on foreign portfolio investment inflows in two ASEAN countries, Namely Indonesia and Thailand, in 2005 – 2019. The analytical tools used in this research are Panel Vector Error Correction Model (PVECM) and Panel Ordinary Least Square (POLS). The estimation results show that the macroeconomic variables that are proxied using inflation and openness economy and institutional variables that are proxied using the variable level of corruption and quality of regulation have a significant effect. In the long term, the inflation rate, the openness economy, and the quality of regulation variables significantly affect foreign portfolio investment. Meanwhile, in a short time, only the inflation rate variable and the openness ratio have a significant effect on foreign portfolio investment. The two analytical tools used found that macroeconomic and institutional variables consistently affect foreign portfolio investment.

Deep Trade Agreements and Domestic Institutions in the Americas

Preferential trade agreements (PTAs) have spread rapidly around the world since the 1990s. In the Americas, the proliferation of trade agreements with countries from within and beyond the region have resulted in a “spaghetti bowl” of overlapping rules and regulations, some of which address behind-the-border issues such as investment, competition, labor, and environmental standards. Earlier research has linked trade agreements to increased foreign investment inflows. This article argues instead that the effects of PTAs on FDI depend on the domestic institutional capacities of member countries. Domestic institutions condition the benefits and effectiveness of PTAs by influencing governments’ external credibility as well as their ability to implement the agreements they sign. The empirical findings show that weak state capacity exacerbates the spaghetti-bowl effects of multiple, overlapping agreements. Moreover, it is not the quantity but the quality, and more specifically, the depth of trade agreements that matters for attracting FDI.

Post-Soviet states and CO2 emissions: the role of foreign direct investment

ABSTRACT Natural resource abundance, growth-oriented strategies and low environmental concern of post-Soviet states may exacerbate the consequences of climate change significantly. This study considers the relationship between CO2 emissions, economic development, foreign investment inflows, trade and energy use in 20 post-Soviet states between 1995 and 2017. A panel cointegration test reveals the long-term cointegrating relationship between the variables. Long-term elasticities are reported using Dynamic Ordinary Least Squares and Fully Modified Ordinary Least Squares regressions, which yield quite similar results: GDP per capita, foreign direct investment (FDI) inflows, trade and energy use positively related to CO2 emissions per capita in the long term. A panel causality test, however, identifies unidirectional causality running from CO2 emissions to energy use at p<0.01. In other words, greater economic activity in terms of foreign capital inflows, larger trade shares, extensive energy use and economic development, harm the environment through increasing CO2 emissions and strengthen the need for greater environmental and climate change concerns. The study aims to contribute to this Special Issue through accounting for the role of foreign direct investment and foreign trade in the sustainable development of post-Soviet states.

INSTITUTIONAL FACTORS OF ATTRACTING FOREIGN DIRECT INVESTMENTS IN THE INFRASTRUCTURE OF UKRAINE

The article examines the system of institutional support for the inflow of foreign direct investment, because the lack of a reliable legal and institutional environment causes the slowdown of the modernization of the infrastructure of Ukraine's economy. The production potential of the industry depends directly on the equipment and the latest technologies, the ability to use innovative methods productively. Effective development is not possible without investment funds, which determine not only financial support but also innovative modernization. The use of a range of factors to attract foreign direct investment is a priority policy for the development of a cost-effective economy focused on the European type of development. It is established, firstly, that institutional factors significantly affect the volume of foreign direct investment in countries with economies in transition; secondly, it has been found that the maturity of state institutions depends on numerous macroeconomic indicators of countries' development, including foreign direct investment, which may be accompanied by high transaction costs in a non-transparent institutional environment; thirdly, it is emphasized that one of the methods of creating a favorable institutional environment is a comprehensive analysis of relevant international indicators; then, the system of indices for assessing the institutional environment of the national economy is applied; afterwards, it was confirmed that the development of various state institutions will increase the inflow of foreign investment, which will promote innovation, effective technology transfer, and this, in turn, will ensure economic growth and modernization of Ukraine’s infrastructure. Carrying out the analysis and applying the proposed tools to study the impact and opportunities to increase the volume of foreign direct investment will lead to the modernization of the infrastructural sphere of life in Ukraine and opens a new field for a broader study of this topic. The development of economic life and investment requires extensive analysis and identification of tools to regulate an important area in the modern world. Keywords: infrastructure, foreign direct investment, institutional environment, performance indices of state institutions, bilateral investment agreements