Investment In Less Developed Countries Research Articles

Globalization, Foreign Direct Investment, and Climate Change

Abstract There has been a dramatic increase in the long-term accumulation of foreign direct investment (FDI) in less-developed countries from 1980–2018. Scholars argue that these processes have harmful effects on climate change-inducing emissions. Here, the author argues that such expansions have beneficial impacts. He empirically evaluates such theorization using fixed effects (FE) panel regression models. Results provide support for his view. These results suggest that the long-term accumulation of foreign direct investment in less-developed countries has beneficial implications for the scale, intensity, and ecoefficiency of carbon dioxide emissions.

Cash on the Table? Imperfect Take-up of Tax Incentives and Firm Investment Behavior

We investigate whether tax incentives are effective in stimulating private investment in less developed countries, by exploiting the introduction of accelerated depreciation for fixed assets investment in China as a natural experiment. In contrast to the large positive impact of similar tax incentives in the U.S. and U.K. found in recent studies, accelerated depreciation appeared ineffective in stimulating Chinese firms’ investment. Using confidential corporate tax returns from a large province, we find that firms fail to claim the tax benefits on over 80 percent of eligible investments. Firms’ take-up of the tax incentive is significantly influenced by their taxable positions and tax sophistication. Information transmission and resources of local tax authorities also play a significant role. Our study contributes to the understanding of conditions under which tax-based investment incentives can be effective.

The application of DNPV to unlock foreign direct investment in waste-to-energy in developing countries

Commercial potential in developing countries has always received a great attention from international investors, but this is not the case in Waste-to-Energy sector. Waste-to-Energy is bound up with various uncertainties rooted in its long-term nature therefore incorporating risks regarding political matters in developing countries makes it more complex. The present study substantiates the incompatibility of classic valuation methods in risky projects. Consequently, to deal with the riskiness of Waste-to-Energy investment in less developed countries, the combination of binomial tree analysis and Decoupled NPV is proposed. The hybrid approach is deployed to value a Waste-to-Energy project in Iran, and all evidence attest to the robustness of the method. The contribution of this paper can open up new vistas for investing in Waste-to-Energy industry, thus abating the catastrophic effects of landfill gas emissions.

Illicit financial flows and foreign direct investment in developing countries

Africa is facing a number of challenges that are negatively affecting socio-economic development at all levels of governments and local governments are expected to play a leading role for Africa’s development. One of these challenges are illicit financial flows that are perceived by many as a crime against Africa’s transformation. The continent is losing billions of dollars every year because of tax evasion, corruption and inappropriate transfer pricing and maladministration. With tax being one of Africa’s main sources of revenue, current and past researches revealed that, illicit financial flows (IFFs) cripple African Governments tax base as a results of capital outflows and lack of good governance. This situation obviously is a challenge for Africa’s development as governments struggle to finance structuring projects and this in turn compels these governments to seek funds from international organisations at very high interest rates. It is also important to reveal that Foreign Direct Investment (FDI) rapidly grew after the Second World War with the intention to maximize profit on investment in less developed countries and specifically in the African continent. In competing in Africa, most multinationals main objective is to pay less tax, make extensive profits and transfer the proceeds to their country of origin. This subsequently gave rise to illicit financial flows in Africa where the continent is losing billions of dollars. Past studies equally revealed that, Africa’s revenue could increase between 55 and 65%, if appropriate mechanisms of monitoring the flows were in place. This study therefore is based on the premise that, tax evasion, illicit financial flows, corruption and abusive transfers pricing are all factors that affect Africa’s development. Using appropriate method of inquiry, this study wants to demonstrate the presence of FDI’s in Africa as a modus operandi behind tax evasion. It also using the “Appropriability Theory” to explain the rationale for FDI in Africa.

Aid and investment in LDCs: A robust approach

This paper uses panel data and the Local Linear Kernel Estimator (LLKE), to investigate the effects of aid on physical capital investment in developing countries. Specifically, we investigate the robustness of the relationship between aid and physical capital investment in Less Developed countries (LDCs) using two different measures of aid and five measures of the policy environment. We find that external aid has a positive and significant impact on physical capital investment given the support of the sample data we use. This effect is robust to the measurement of aid as well as the policy environment. However, the character of the positive relationship between aid and investment varies with the combination of the aid measure and the policy environment. We find that conditional on inflows, the better the policy environment, the higher the investment rate, all things being equal. The results have implications for aid research and aid policy.

Determinants of Foreign Direct Investment in Less Developed Countries: A Factor Analysis Approach

Using factor analysis this study explores factors influencing the choice of foreign direct investment in less developed countries. Results show significant relationships between foreign direct investment and institutional quality, infrastructure development, market size, availability of natural resources, and quality of human capital. However, the study found no significant relationship between foreign direct investment inflows and economic stability.

The Location of Export-Oriented Foreign Direct Investment in the Caribbean Basin

This paper analyzes the location of export-oriented manufacturing investment. The analysis focuses on direct investment in the Caribbean Basin, using micro data for all reported manufacturing plant openings from 1984–87. We test a broad range of influences on country selection and compare the results with the existing literature on foreign direct investment in less-developed countries. The probability of country selection was estimated with a conditional logit model. The estimates were then used to predict the location of Caribbean Basin investments made in 1988 and 1989. Twelve independent variables were tested. Six variables had a statistically significant, positive relationship with plant location: per capita GNP, exchange rate devaluation, the length of income tax holidays, the size of free trade zones, political stability, and manufacturing concentration. Negative relationships were found for the wage rate, inflation rate, transportation cost, and profit repatriation restrictions.

International Protection of Direct Foreign Investments in the Third World

PRIVATE investors invest to make profits and not for reasons of benevolence. Thus, if they make profits they expect, albeit not unnaturally, to keep them, subject to payment of appropriate taxes to the local authorities; if they acquire property, they expect to be entitled to keep it. The feeling of insecurity in these respects is, perhaps, the major deterrent to the flow of direct foreign investment in less-developed countries (LDC). Because of the need to ensure a steady flow of investment to LDCs and to improve the investment climate in LDCs, measures have been and are being taken to promote and protect direct foreign investment in LDCs. We are not concerned here about public investment which is normally undertaken pursuant to a treaty between the lender (which may be a government agency or an international financial institution such as the World Bank) and a borrower in the State, which more often than not is a public enterprise, with the government serving as a guarantor. No State would assert that it was entitled by the exercise of power of eminens dominium (eminent domain) to terminate the right of an investing State or of the World Bank to recover the loan or investment it had

Energy sector investment in LDCs: The credibility gap widens

Large capital investment needs continue to be projected for the energy sector in less developed countries (LDCs) despite strong signs of a fall in the foreign exchange component of capital investment. Known data do not encourage optimism for the achievement of, notably, the World Bank's ambitious proposals. Sectoral partition of capital flows to energy in LDCs continues to favour electricity, with growing aid (if at a low relative level) to conservation and policy support. This does not accord with continued strong needs for oil and gas in LDCs, where capital flows have fallen most dramatically since 1980, and show both industry related, and other reasons for continuing their slide. It is suggested that volumes and partition of capital flows to energy in LDCs are not appropriate, and do not respond well to either the debt crisis, or the energy-economic structure of their economies. In this perspective, new policies for aid and investment flows to LDCs from the developed countries must be developed and sustained, associated with the appropriate financial strength.

ASSESSING POLITICAL RISK IN LESS DEVELOPED COUNTRIES

Corporate investment in less developed countries can be a lucrative source of resources and earnings. But how does one minimize the risks—particularly the political risks? The current trend in risk‐assessment methodology is to use “hard data” rather than subjective analysis. But this can be a drawback because the quantitative methodologies used are often determined by the data available. Presented here is a framework for political risk assessment that does more than simply look at the numbers.

Incentives and disincentives for foreign direct investment in less developed countries

Incentives and disincentives for foreign direct investment in less developed countries

Fiscal incentives and direct foreign investment in less developed countries

This study found no support for the belief by the governments of most less developed countries (LDCs) that the provision of fiscal incentives is necessary to attract direct foreign investment and that the greater the generosity of these incentive programmes the greater would be the level of such investment. What mattered were the presence of natural resources and a proven record of economic performance. The provision of incentives could not compensate for the absence of either of these two factors. The study is a cross‐sectional one of 27 LDCs for the period 1965–73.

The economics of tax incentives to encourage investment in less developed countries

The economics of tax incentives to encourage investment in less developed countries

Multinationals and development: a new look

What is a multinational corporation? What effect do their investment and research policies have on the economies of the less-developed countries? In discussing these questions Sanjaya Lall draws on experience as an economist with the World Bank and as director of an UNCTAD-sponsored project dealing with foreign investment in less-developed countries. He is at present Research Officer at the Oxford University Institute of Economics and Statistics.

Cross-Section Evidence for Balanced and Unbalanced Growth

PpTHE terms balanced and unbalanced appear in many and varied contexts within economic theory. One writer has even suggested that it is a cause of much confusion that 'balance' in economic could mean almost anything (Ohlin, 1959, p. 338). This lack of definition has also characterized attempts at statistical verification of the theories. Balanced in the Nurkse (1953) sense arose in the context of development economics and sought to provide some policy conclusions for less developed countries. Solow-Samuelson-Von Neuman balanced is of more theoretical interest and of broader application. Two recent papers (Swamy, 1967 and Yotopoulos, 1970) laboured under the disadvantage of mixing these two quite separate notions of balanced growth. We shall argue that consequently, the evidence already presented sheds little light on the development controversy. This paper examines evidence for balanced and unbalanced theories in the Nurkse-Hirschman sense (Haberler, 1961; Hirschman, 1958; Nurkse, 1953). Nurkse's balanced argument involves two propositions: firstly, the size of the domestic market is maximized only with a balanced of sectors because, by assumption, excess supply is wasted and excess demands are frustrated; secondly, the size of the market is the main determinant of investment in less developed countries. Therefore, Nurkse viewed balance as a means of stimulating growth. Hirschman's version of unbalanced growth, like Nurkse's theory, was concerned primarily with the inducement to invest. Only Hirschman argued that excess demand and supply are necessary in order to make investment decisions obvious. Excess demand induces investment in supplying industries (backward linkage) and excess supply leads to the establishment of using industries (forward linkage). It is clear that Hirschman's theory of unbalanced applies mainly to the intermediate goods sector. A number of studies (including Bhatt, 1965 and Mathur, 1966)) have made considerable ground in providing a synthesis of the theories, usually developing the fact that Nurkse and Hirschman exempt vertical and horizontal sectors, respectively. Consequently there may not arise a problem of policy choice between balanced and unbalanced growth. In the context of this paper, the most important feature of both theories is the implicit exclusion of the effects of international trade. If trade becomes the engine of growth in any less developed country, the theoretical controversy becomes less relevant for development policy. Furthermore, distortions in sectoral rates due to international trade, do not constitute unbalanced in the Hirschman sense. These considerations render difficult any empirical enquiry.