Share Of Foreign Direct Investment Research Articles

Study of FDI Trends and Patterns in BRICS Economies during the Period 1990–2015

There has been a sea of change in foreign direct investment (FDI) patterns over the last two decades. One of the significant developments has been the developing economies and frontier nations garnering significant attention of foreign investors. Regions like developing Asia have been successfully commanding a huge share of FDI inflows. However, it has been observed that FDI patterns are quite skewed in nature in terms of sector and region-wise economic groups, such as Asia-Pacific Economic Cooperation (APEC); Transatlantic Trade and Investment Partnership (TTIP); Brazil, Russia, India, China and South Africa (BRICS); and Regional Comprehensive Economic Partnership (RCEP). Of these, BRICS nations are recognized as the most developed among the emerging economies. This research article is an attempt to examine the trends and patterns of FDI flows in BRICS economies during the period from 1990 to 2015. The study shows that developed markets are still considered to be drawing the lion’s share of FDI, claiming the top slots in global FDI inflows. But high-performing emerging and frontier markets can continue to attract FDI inflows if they have investors’ preferred market characteristics. Also there is a lot of unpredictability in the global FDI flows, indicating challenges and opportunities for both global business executives and countries seeking to promote investment. It is thus imperative that policymakers eliminate hurdles to FDI inflows and increase the absorptive ability to earn optimum positive results.

Strane direktne investicije i lokalna finansijska tržišta

International capital movements represent a significant form of international financing and one of the decisive factors of globalization, given that capital invested beyond the national economy borders becomes multinational character, and also it affects the balance of payments, economic growth, employment, transformation of the economic structure, and economic stability of individual countries. International capital movements include international lending, international portfolio investment, and foreign direct investment abroad. At the beginning of the 1990s, the share of capital flows across borders was significantly increased, and their structure was hanged, with significant share of foreign direct investment. This paper presents the effects of foreign direct investment on the host country, and in particular on the economic development of the host country, as well as the perception of the role of local financial markets as intermediaries for achieving potential benefits. The focus of the paper is on the link between finance, foreign direct investment and development. The aim of the research is to point out the complementarity between foreign direct investment and local financial markets.

Impact of Greenfield FDI versus M&A on growth and domestic investment in developing Asia

A large literature establishes the growth-enhancing benefits of foreign direct investment (FDI) flows into emerging market economies in general. Conventional wisdom holds that FDI is a preferable form of external financing compared to other types of capital flows because of its stabilizing properties. While this might hold true largely for FDI flows of the Greenfield variety, in reality, a greater share of FDI to emerging economies in general and Asian economies appears to be in the form of mergers and acquisitions (M&A). Do all types of FDI flows produce similar macroeconomic benefits? This paper empirically explores whether the type of FDI flow, i.e. Greenfield versus M&A, matters in the way it impacts economic growth and domestic investment for a large panel of developing Asian economies over 1990–2013. We find Greenfield FDI contributes positively to economic growth while FDI in the form of M&A appears to have no significant growth influence. We also find that the effects of Greenfield FDI on domestic capital formation are stronger and larger relative to M&A flows.

ANALYSIS AND STRUCTURE OF RUSSIAN DIRECT INVESTMENTS ABROAD

This article analyzes direct investments. Currently, with the development of market relations and the strengthening of international relations, the objective trends in the growing volume of the export of Russian capital, the increase in its scale and the size of foreign assets, the consolidation of Russian companies in the promising segments of the world market, makes the article relevant and important for consideration. For a more precise presentation of the present situation, the structure of capital flows, in the context of economic entities, as well as statistical data on regulatory measures for foreign direct investment, are provided. The analysis revealed an unfavorable situation on the world investment market for the Russian Federation. The outflow of foreign direct investment from countries with economies in transition tends to decline. Carrying out the analysis of investments it is impossible to bypass. It should be noted that the structure of the capital exported from Russia differs from the similar structure of states with a progressive market by the fact that the share of other investments approximates to the share of foreign direct investment, and this trend increases dramatically in the period of instability. A clearer idea allows us to obtain a detailed analysis of the outflow of Russian investments and the inflow of foreign capital, as given in the paper. The article allows to consider the structure and present position of Russian direct investments and foreign capital.

FDI and Growth of Service Sector in India

In the contemporary globalised economy, service sector attracts the major share of Foreign Direct Investment (FDI) in the world. India being a part of this phenomenon also attracts most of its FDI in the service sector. The present paper highlights the trend in FDI movement in the world in general and India in particular. Further, it reviews the FDI policy in India in the post liberalized period. The growth of FDI in services sector may be attributed to the changing pattern of global FDI and also the liberalization and globalization policies pursued by India. Since 2000, the high inflow of FDI has resulted in the growth of new services viz., financial and non-financial services, telecommunication, computer software and hardware, hotel and tourism, construction activities and real estate. The growth of services sector had led to the growth of export of services from India which now accounts the majority of export from the country.Keywords: FDI, Services sector, Export, Liberalization.

Empirical relationship between Foreign Direct Investment and Economic Variables of Pakistan

Empirical relationship between Foreign Direct Investment and Economic Variables of Pakistan

The impact of cross-border acquisitions in Serbia on productivity, wages, and employment

Globalization created a new business environment, characterized by intensive privatization and economic liberalization. The changed business environment opened the way to increased use of crossborder acquisitions, which make the lion?s share of foreign direct investment in transition economies. The acquisitions accelerate transition, facilitating the restructuring of state-owned enterprises and making them more efficient. This paper analyses the impact of cross-border acquisitions in Serbia, an economy in transition, on employee productivity, employment, and wages in acquisition targets. Statistical analysis of a sample comprising 79 cross-border acquisitions carried out in Serbia in the period 2003-2009 shows that the change of ownership had a positive impact on employee productivity and real wages, while the number of employees in the acquired enterprises decreased.

Between Markets and Institutions: Multinational Enterprises as Actors, and an Organizational Approach to Foreign Direct Investment

Since the end of the Cold War, there has been an extraordinary increase in the share of foreign direct investment (FDI) going to developing countries, and political scientists have taken notice. Research has focused on institutional factors, in particular their importance in establishing credible commitments. However, in focusing on institutions, the investors themselves – the multinational enterprises (MNEs) – are largely ignored. This is because the literature models and measures FDI as bilateral economic flows between countries, rather than conceptualizing it as networks of actors, with strategies, goals and the capacity to organize international production. We are missing half the story. This paper focuses on China, the most successful, large developing country FDI host in absolute terms and relative to its large economy. In the general and China-specific FDI literatures alike, China presents a string of anomalies in both aggregate inward FDI and when it is decomposed, including unusual allocations across industries, MNE modes of entry and by country of origin. Almost without exception, China’s domestic institutions serve as the principal explanations, including ones based on credible commitments. This paper reconsiders these anomalies through the lens of MNE organization – specifically, their fragmentation of global production through vertically specialized production networks. Using disaggregated and nested data of industries, sub-industries, firms and a unique database of millions of individual trade transactions, the paper inductively re-constructs Chinese statistical data to uncover very consistent patterns of inward FDI that reveals an underlying MNE organizational logic in the restructuring of East Asian production, for which institutional arguments and market forces are unable to account. More importantly, in contrast to institutional accounts which offer diverse explanations for the anomalies, a MNE organizational approach parsimoniously offers leverage across them. By examining the international economy through the reconstruction of disaggregated national data, we can learn something about China, East Asia and the organization of the international economy.

Currency Union and East Asia

This paper examines the feasibility of the proposal to establish a currency union in the East Asia. In this paper East Asia is composed of ASEAN countries like Brunei Darussalam, Cambodia, Indonesia, Lao PDR, Malaysia, Myanmar, Philippines, Singapore, Thailand and Viet Nam, plus three countries – Japan, China and South Korea. The test for feasibility, the study used Mundell’s concept of factor mobility, Kenen’s trade openness and McKinnon’s product diversification. Results indicate that within East Asian countries, intra labor mobility is immobile. Labor would rather move to European Union 6 countries and United States than stay within the region. Intra capital mobility, on the other hand, is slightly mobile. The average East Asian share of foreign direct investment to gross fixed capital formation is relatively higher compared to developed counties like United States, Germany and France. In terms of trade openness, the volume of trade is relatively higher within the region than the volume of trade in European Union 6 countries and United States. However, it is less symmetric. This means, some countries exports within the region but imports outside the region. Furthermore, there has been increasing diversification of trade within the region. There is even a rise of the share of parts and components in manufacturing. Hence, base on the given results, East Asia is not yet ready to form a currency union. DOI: 10.5901/mjss.2015.v6n2p415

The People's Republic of China's Potential Growth Rate: The Long-Run Constraints

We estimate the People’s Republic of China’s (PRC’s) potential growth rate in 2012 at 8.7% and at 9.2% for the average of 2008-2012, about the same as the average actual growth rate for this period. This rate is the natural growth rate, that is, the rate consistent with a constant unemployment rate and stable inflation. The PRC’s natural growth rate displays a downward trend since 2006, when it peaked at 11.1%. Probably the Great Recession has been an important factor, although we argue that there are other factors. We show that the PRC’s potential growth rate is not demand constrained, in particular by the balance of payments. The PRC’s potential growth rate is determined by the supply side of the economy, in particular by: (i) changes in the structure of the economy, in particular in the share of industrial employment; (ii) the working-age population; (iii) the share of net exports in gross domestic product (GDP); (iv) export growth; (v) the share of foreign direct investment (FDI) in GDP; and (vi) human capital accumulation.

FDI and Growth of Service Sector in India

In the contemporary globalised economy, service sector attracts the major share of Foreign Direct Investment (FDI) in the world. India being a part of this phenomenon also attracts most of its FDI in the service sector. The present paper highlights the trend in FDI movement in the world in general and India in particular. Further, it reviews the FDI policy in India in the post liberalized period. The growth of FDI in services sector may be attributed to the changing pattern of global FDI and also the liberalization and globalization policies pursued by India. Since 2000, the high inflow of FDI has resulted in the growth of new services viz., financial and non-financial services, telecommunication, computer software and hardware, hotel and tourism, construction activities and real estate. The growth of services sector had led to the growth of export of services from India which now accounts the majority of export from the country.Keywords: FDI, Services sector, Export, Liberalization.

Determinants of tax revenue in OECD countries over the period 2001–2011

By using static and dynamic panel data techniques, this paper analyses the impact of economic, structural, institutional and social factors on tax revenue, across 34 countries from the Organisation for Economic Co-operation and Development, over the period 2001–2011. The results show that gross domestic product per capita, the industrial sector, and civil liberties have positive impact on the dependent variable, while the agricultural sector and the share of foreign direct investment in gross fixed capital formation have negative impact. The lagged value of the dependent variable enters positively in the equation and its effect is larger in high income countries. We also encounter tax effort and tax gap and find that they are stable over time but diverse across countries regardless the level of development of the economies.

ASEAN Economic Performance, Institutional Effectiveness, and Foreign Direct Investment

Foreign direct investment (FDI) is considered to be one of the most important forces of economic growth and globalization. Many ASEAN economies have only a small domestic market; they are heavily reliant on international trade and FDI. Recent studies on cross-border investment indicate the importance of domestic economic performance and institutional effectiveness (including government effectiveness, regulatory quality, rule of law and property rights protection) in attracting FDI. The result from a cross-national empirical analysis, in this study, also confirms the significant impact of macroeconomic performance and institutional factors on FDI flows into developing countries. In this paper, it is argued that, with the exception of Singapore, most ASEAN countries are afflicted with relatively poor institutions for good governance, with low government effectiveness, and poor regulatory quality and rule of law. This relatively poor institutional quality may exacerbate the effects of external threats. As higher economic growth and better economic integration in other regions may divert FDI flows into ASEAN countries, their appropriate response is to improve institutional quality so that the share of FDI will increase in the total FDI inflows. Improving the institutional environment among ASEAN member countries should, therefore, be an important goal of ASEAN economic integration.

Trade openness and foreign direct investment in Africa

Africa’s share of foreign direct investment (FDI) has lagged behind other regions in the world, despite a sharp increase in FDI inflows to the region in 2001. Factors contributing to this circumstance include perceptions of high corruption, weak governance and poor infrastructure. The motivation of this paper is to investigate the impact of openness to trade on the FDI inflow to Africa. In addition to economy-wide trade openness, we also analyse the impact on FDI of openness in manufactured goods, primary commodities and services. The empirical work uses cross-country data from selected African countries observed over four periods: 1980-1985, 1985-1990, 1990- 1995 and 1995-2001. We find that the FDI to GDP ratio responds well to increased openness in the whole economy and in the services sector in particular.

Protection of Sovereign Wealth: Book Review of Sovereign Investment: Concerns and Policy Reactions / edited by Karl P Sauvant, Lisa E Sachs and Wouter PF Schmit Jongbloed

This collection of essays by leading specialists from the International Monetary Fund (IMF), Organisation for Economic Co-operation and Development (OECD), academia, law firms, transnational corporations and think-tanks analyses the role of sovereign investors in the international economy. It adopts an interdisciplinary approach to a wide range of issues raised by investments of sovereign wealth funds (SWFs) and State-owned enterprises (SOEs). It highlights that, contrary to the general supposition that sovereign investments would flow overwhelmingly from rich to developing countries, sovereign investments from developing countries actually predominate. Sovereign investment constitutes an increasingly important portion of foreign direct investment. In 2012, there were more than 70 SWFs globally—60 percent of which were established in the past decade—and their number is expected to continue to rise. Cumulative foreign direct investment by SWFs amounted to at least US$127 billion in 2012. 2 SOEs are also expanding their investments abroad. The number of SOEs investing abroad increased from 659 in 2010 to 845 in 2012, with SOEs having a cumulative share of foreign direct investment of 10 percent. 3

Foreign Direct Investment: Is There Room for Human Capital Spillovers?

Many developing countries are financially constrained and therefore have to rely on international capital flows to finance economic activity. Empirical evidence shows that Foreign Direct Investment (FDI) as a percentage of total capital flows is higher for less developed countries compared to more developed countries. This paper uses a dynamic contracting model with human capital to explain why less developed countries receive a greater percentage of capital flows as FDI. I analytically show that countries that are financially constrained have a higher share of FDI in total capital flows, and that the share of FDI in total capital flows is increasing in human capital flows. In addition, the positive association between the share of FDI in total capital flows and human capital flows is decreasing in the degree of financial constraints. I construct a measure of intangible assets of FDI and find empirical support for the analytical results.

Resource-based FDI and expropriation in developing economies

Globally, foreign direct investment (FDI) assets are expropriated more in resource extraction industries compared to other sectors. Despite the higher apparent risk of expropriation in resources, countries more likely to expropriate also have a larger share of FDI in the resource sector. An incomplete markets model of FDI is developed to account for this puzzle. The type of government regime is stochastic, with low penalty regimes facing a relatively low, exogenous cost of expropriating FDI, and country risk is measured by the variation in these costs across different regimes. The key innovation of the model is that the government, before the regime type is known, is able to charge different prices to domestic and foreign investors for mineral rights. Granting cheap access increases FDI and reduces the country's share of resource rents, increasing the temptation to expropriate in a relatively low penalty regime. In very high-risk countries, subsidizing resource FDI increases the total value of output by raising investment, and the net gains from expropriating in a low penalty regime outweigh the rents foregone under a high penalty one. However, a stochastic resource output price results in relatively low-risk countries restricting FDI inflows to the resource sector instead — “windfall profits” in this sector raise incentives to expropriate when prices are high, yet minimization of the ex ante risk of expropriation is preferred owing to the relatively high penalty for expropriating. These results imply a higher average share of resource-based FDI in countries most likely to expropriate, while resources account for a high share of expropriated assets compared to the sector's global share of FDI. We show that the model is able to reconcile observed patterns of foreign investment and expropriation for a sample of 38 developing and emerging economies.

Economic Growth and Employment from 1990-2010

In this article we estimate the growth elasticity of employment by gender for 160 countries during 1990-2010. We then econometrically model these elasticities to draw out the structural contexts in which gendered employment outcomes respond differently to growth, including measures of economic structure, demographic change, macroeconomic stability, global stance and policy, and income distribution and institutional development. Our investigation shows that the relative size of the service sector and the ratio of female to male labor force participation are key determinants of differences in employment elasticities by gender, creating higher elasticities for women than men. We also find that the terms of global integration, as measured by the current account balance, growth in the terms of trade, and the share of foreign direct investment in investment, are important for both female and male employment elasticities. JEL Classification: O5, F4, B54

Challenges of Foreign Direct Investment in Ghana, Examining Empirical Evidences in Vodafone Ghana

In recent times there has been a concerted attempt to attract Foreign Direct Investment (FDIs) into Ghana. This is largely due to the need for development in the country, as a way of enhancing the standard of living of the people. Foreign Direct Investment (FDIs) is seen as a catalyst for this development.Most African countries including Ghana abound in natural resources. However, most of these resources are untapped due to inadequate capital and technical know-how to harness such resources. Ghana has had its fair share of Foreign Direct Investment (FDIs) in the recent years; mostly in the sectors of Mining, Banking, and Telecommunications; Road Construction, Broadcasting, Automobile and manufacturing Industries. Despite the apparent economic benefits to be accrued to both the nation and its citizens, there has been some criticism and public outcry against these foreign investments. Some are of the view that bringing foreign investors means entrusting the destiny of the nation into the hands of these foreigners. Others are of the opinion that these foreign investors have no genuine interest for the socio-cultural and economic development of the country; sometimes often downplay the very source of the identity – our cultural heritage. At least two issues make FDIs hotly debatable issues in Ghana as to whether FDIs really beneficial and leads to socio-economic development of the Ghanaian economy. Economic growth is not an end unto itself. Growing the economy is a vital task for every government, generations and generations yet unborn because of what economic growth brings; a better life for millions of Ghanaian people and hundreds of millions of people around the African continents.Foreign Direct Investment in Ghana faces major challenges that impede their smooth transition. This research paper discusses these issues as the basis of tackling major challenges faced by investors and its implication for policy makers if FDIs are to contribute for national development.

Coercive Assets? Foreign Direct Investment and the Use of Economic Sanctions

How does foreign direct investment (FDI) affect the use of economic coercion? This article argues that while FDI matters, the effect depends on the entry mode of the FDI. The economic interdependence created by FDI does not have a monotonic effect on economic statecraft because the relative costs incurred by economic disruption differ depending on the forms of foreign investment. In particular, the FDI that creates wholly-owned subsidiaries (for example, cross-border mergers and aquisitions) imposes greater costs to the sender's firms than cross-border joint ventures with local partners, while FDI through joint ventures incurs greater costs for the host than the home country and its firms. By utilizing US sanction episodes from the Threat and Imposition of Economic Sanctions (TIES) dataset, the empirical analysis supports the argument. The results show that economic sanctions are less likely to occur as the share of FDI through cross-border mergers and acquisitions increases.