Sustainable FDI Research Articles

The moderating effects of environmental and regulatory quality on financial development to promote sustainable FDI inflows in Canada

Stimulating sustainable FDI through the connection of financial development and its moderating relationships with environmental quality and regulatory quality emerges as a crucial agenda nowadays. This study investigates into this relationship using quarterly data from 1990Q1 to 2022Q4 for Canada; employing ARDL bound tests, Granger Causality, and FM-OLS econometric models. Foreign direct investment is the dependent variable of this study. The findings confirm significant long-run relationships among financial development, stock market development, and the moderating effects of environmental and regulatory quality on FDI inflows in the Canadian economy. Conversely, in the short run, financial development, stock market development, and economic growth exhibit bidirectional causal links with FDI, while environmental quality, regulatory quality, and trade openness demonstrate unidirectional causal links with FDI. The error correction mechanism indicates that all variables quickly return to equilibrium except trade openness. Robustness checks further confirm that all the variables have fully modified co-integrating relationship with FDI inflows including the moderating effects of environmental and regulatory quality which is the innovation in the FDI-Growth existing literature. Thus, policymakers are urged to prioritize environmental quality and regulatory quality, alongside other significant explanatory variables identified in this study to promote sustainable FDI inflows.

Sustainable FDI and comparative advantage for product export survival: a developing countries perspective

Establishing stable export relations is significant for developing countries to realize industrialization through exporting manufactured products. Based on the export data of 100 developing countries on the product level from 1999 to 2015, this paper empirically explores the relationship between FDI and product export survival of the host country using the survival analysis model. The estimations show that FDI is conducive to the extension of the export duration of domestic products, and this effect is more evident in products with comparative advantages. Mechanism inspections prove that FDIs extend the export duration of products by improving their quality. To overcome endogenous problems, this paper establishes instrumental variables of FDI based on population and geographical factors. The results of the two-stage least square regression support the conclusions derived from the benchmark regression. This paper provides new empirical evidence for the role of FDI in export promotion and resource allocation.

Sustainable Economic Growth and FDI Inflow: A Comparative Panel Econometric Analysis of Low-Income and Middle-Income Nations

The study examines the effect of sustainable economic growth on “FDI inflow” using comparative panel econometrics on two panels: “low-income” and “middle-income” economies between 1970 and 2021. For this, 18 “low-income” and 53 “middle-income” economies constitute the sample. The data were retrieved from the “world development indicator” website. Pre-diagnostic and post-diagnostic estimations were performed using static panel and dynamic panel approaches. Sustainable growth increases “FDI inflow” in “low-income” and “middle-income” economies during the study period, according to the findings. In addition, trade openness and the exchange rate have the potential to boost “FDI inflow” in “low-income” economies. Similarly, in “middle-income” economies, the real growth rate and exchange rate are significant boosts, however inflation significantly reduces the “FDI inflow”. The findings show that policymakers in “low-income” and “middle-income” economies should maintain long-term, sustainable economic growth in order to attract more “FDI inflow” in their respective economies. Compared to the current state of knowledge in the subject, the study’s findings provide evidence for “low-income” and “middle-income” nations that have been mainly overlooked in terms of sustainable growth for attracting FDI inflow. The study’s outcomes are applicable and generalizable only for “middle-income” and “low-income” economies. Future researchers may include additional control factors and expand the scope of the study to include “high-income” groups.

Investigating the determining factors of sustainable FDI in Vietnam

PurposeThe main purpose of this paper is to analyze the sustainable inward FDI pattern of Vietnam.Design/methodology/approachThis paper intends to analyze the sustainable FDI pattern of Vietnam using the gravity theory and panel data approach for the annual data over the period of 2007–2020.FindingsVietnamese FDI volume is positively affected by political and social factors, globalization and green energy consumption, while geographical distance is a major obstacle to the increase of FDI inflows of the country.Practical implicationsAs the main practical policy implications, issuing policies for sustainable economic growth, launching the novel strategy of green FDI neighborhood policy and regionalism through free trade agreements are recommended.Originality/valueTo the best of author's knowledge, there has not been any in-depth academic study focusing on the Vietnam's sustainable FDI. In addition, three robustness checks have been conducted to ensure the validation of empirical findings.

Can Foreign Direct Investment Complement or Substitute Public Agricultural Spending for the Sustainability of the Agricultural Sector in Nigeria? Empirical Evidence Using Monte Carlo Simulation

The study analyzed the response of agricultural growth to foreign direct investment and public agricultural spending from 1980 to 2018. Data were collected from secondary sources and analyzed using Johansen Co integration, Vector Error correction model and Monte Carlo Simulation. The result showed that foreign direct investment and public agricultural spending increased agricultural production in the long but decreased it in the short run. The study concluded that an increase in foreign direct investment and an increase in public agricultural spending (scenario 3) provided the best alternative for the sustainability of agricultural growth in Nigeria. It was recommended friendly business policies should be made to attract more foreign direct investment into the country and the issues of insecurity and infrastructures should be handled for meaningful and sustainable FDI to be attracted into Nigeria.

Improving the distribution of FDI benefits: The need for policy-oriented research, advice, and advocacy

This article explores the different ways in which governments can increase the benefits of FDI and manage the relationship between governments and international investors in a mutually beneficial manner. It focusses on three concrete policy fields in which discussions are afoot that bear on this issue, and where opportunities to exercise influence exist: encouraging more sustainable FDI; enhancing the distribution of benefits associated with FDI; and anchoring sustainable FDI, corporate social responsibility, and responsible business conduct in the international investment law and policy regime and, specifically, in the context of the negotiations of an Investment Facilitation Framework for Development at the WTO. These are examples of policy areas that warrant attention, with a view toward scholars seeking to influence the way in which they are tackled, through applied multidisciplinary policy-oriented research, concrete recommendations, and targeted advocacy.

Facilitating Sustainable FDI for Sustainable Development in a WTO Investment Facilitation Framework: Four Concrete Proposals

Foreign direct investment (‘FDI’) can be an important vehicle for development. However, in recent years, the focus has not just been on development generally, but sustainable development specifically. Thus, this article focuses on how countries can increase levels of FDI geared toward projects likely to contribute as much as possible to countries’ sustainable development—in other words, how countries can increase flows of sustainable FDI. To that end, and in light of the World Trade Organization’s ongoing Structured Discussions on Investment Facilitation for Development, this article first discusses the notion of ‘sustainable FDI’ and then outlines four issues and related concrete proposals whose implementation through an investment facilitation framework for development would help to ensure that commercially viable FDI makes a besteffort contribution to sustainable development: (1) How can governments encourage sustainable FDI? (2) How can governments promote corporate social responsibility (‘CSR’)? (3) How can one create the special category of ‘Recognized Sustainable Investor’ to incentivize international investors to implement their CSR commitments and engage in sustainable FDI? (4) What role can home countries play in facilitating outward FDI flows, especially the flow of sustainable FDI? Looking at the question of a multilateral framework from the perspective of its objective— namely ‘for development’—is particularly important as this objective should guide the negotiations of such a framework. sustainable FDI, sustainable development, WTO investment facilitation discussions, corporate social responsibility, home country policies, recognized sustainable investor

More and better investment now! How unlocking sustainable and digital investment flows can help achieve the SDGs

The global community can address the collapse of investment following COVID-19, drive digital transformation, and help achieve the SDGs through five actions: (1) establish a Facility and Fund to provide resources for technical assistance and facilitate private–public collaboration, including through a new EASI Alliance, (2) endorse a Sustainable Investment Framework to advance such collaboration, through aligning and coordinating efforts, (3) adopt specific investment policies and measures to support sustainable FDI for sustainable development, prioritizing linkages, (4) adopt specific policies and measures to facilitate investment in the digital economy, accelerating productive transformation while building resilience, and (5) develop partnerships and industry-based coalitions to operationalize these efforts.

More Attention to Policies! Improving the Distribution of FDI Benefits: The Need for Policy-Oriented Research, Advice and Advocacy

This article explores different ways in which governments can increase the benefits of FDI and manage the relationship between governments and international investors in a mutually beneficial manner. It focusses on three concrete policy fields in which discussions are afoot that bear on this issue, and where opportunities to exercise influence exist: encouraging more sustainable FDI; enhancing the distribution of benefits associated with FDI; and anchoring sustainable FDI, corporate social responsibility and responsible business conduct in the international investment law and policy regime and, specifically, in the context of the negotiations of an Investment Facilitation Framework for Development at the WTO. These are examples of policy areas that warrant attention, with a view toward scholars seeking to influence the way in which they are tackled, through applied multidisciplinary policy-oriented research, concrete recommendations and targeted advocacy.

More and Better Investment Now! How Unlocking Sustainable and Digital Investment Flows Can Help Achieve the SDGs

The global community can address the collapse of investment following COVID-19, drive digital transformation, and help achieve the SDGs through five actions: (1) establish a Facility and Fund to provide resources for technical assistance and facilitate private–public collaboration, including through a new EASI Alliance, (2) endorse a Sustainable Investment Framework to advance such collaboration, through aligning and coordinating efforts, (3) adopt specific investment policies and measures to support sustainable FDI for sustainable development, prioritizing linkages, (4) adopt specific policies and measures to facilitate investment in the digital economy, accelerating productive transformation while building resilience, and (5) develop partnerships and industry-based coalitions to operationalize these efforts.

How to Attract ‘Digital FDI’ and Sustainable FDI for COVID-19 Recovery?

This presentation, at the first webinar of the T20 Task Force 1 on Trade, Investment, and Growth during the SaudArabian G20 Presidency, argues for twin effort

An Inventory of Concrete Measures to Facilitate the Flow of Sustainable FDI: What? Why? How?

The Inventory was prepared in the framework of the investment facilitation for development project undertaken by the International Trade Centre (ITC) and the German Development Institute (DIE). It is an informal and unofficial compilation of investment facilitation measures, their rationale and ways in which these measures are—or can be—implemented in practice. It is a capacity-building tool meant to help participants engaged in the WTO negotiations of a multilateral framework on investment facilitation for development, paying special attention to measures that directly increase the development contribution of FDI. Following the agreed scope of the WTO negotiations, it does not include measures related to investment protection, investor-state dispute settlement (ISDS) and market access. The Inventory can also be of use to investment promotion agencies seeking to facilitate FDI flows.

Advancing Sustainable Development by Facilitating Sustainable FDI, Promoting CSR, Designating Recognized Sustainable Investors, and Giving Home Countries a Role

Foreign direct investment (“FDI”) can be an important vehicle for development. However, in recent years, the focus has not just been on development generally, but sustainable development specifically. Thus, this article focuses on how countries can increase levels of FDI geared toward projects likely to contribute as much as possible to their sustainable development—in other words, how countries can increase flows of sustainable FDI. To that end, and in light of the WTO’s ongoing negotiations on a multilateral framework for Investment Facilitation for Development, this article first discusses the notion of “sustainable FDI” and then outlines four issues and related concrete proposals whose implementation through an investment facilitation framework for development would help to ensure that commercially viable FDI makes a best-effort contribution to sustainable development: (1) How can governments encourage sustainable FDI? (2) How could governments promote corporate social responsibility (“CSR”)? (3) How could one create the special category of “Recognized Sustainable Investor” to incentivize international investors to implement their CSR commitments and engage in sustainable FDI? (4) What role can home countries play in facilitating outward FDI flows, especially the flow of sustainable FDI? Looking at the question of a multilateral framework from the perspective of its objective—namely “for development”—is particularly important as this objective should guide the negotiations of such a framework.

Determinants of sustainable FDI: a panel data investigation

PurposeThe purpose of this paper is twofold: to explore the interrelationships between FDI with growth and sustainability dimension; and to empirically analyze the four dimensions, namely, environmental, economic, social and governance of sustainable FDI for South Asia and West Asia.Design/methodology/approachThe data utilized in the paper is sourced from the World Development Indicators and the Worldwide Governance Indicators, covering South and West Asian region over the period 2011–2017. The paper employed both static and dynamic panel (two-step difference generalized methods of moments) estimation methods.FindingsThe results established a significant and robust relationship of past year FDI inflows with the current year’s value of FDI inflows for both the regions. Further, some variances in the relationships such as control of corruption, long-run carbon emissions, research and development, number of trademark applications as per the contextual factors have been detected.Research limitations/implicationsThe conclusions related to gender and governance found in this paper will be of interest to both researchers and policy makers for substantially reorienting the sustainability attributes to the foreign investment.Originality/valueThe authors’ main contributions are: to encapsulate the conceptual framework into an empirical model by combining all the four dimensions, namely, environmental, economic, social and governance; to have analyzed the possible differences and similarities in the study based on South and West Asia; to have explored the relationship between gender and FDI.

The Potential Value-Added of a Multilateral Framework on Investment Facilitation for Development

This article argues that investment facilitation needs to be seen in the context of the principal FDI determinants and, in particular, the all-important economic determinants. Beyond that, when negotiating a multilateral framework on investment facilitation for development, it is crucial to (1) give full attention to the development dimension of investment facilitation, by promoting sustainable FDI for sustainable development; (2) establish an inventory and benchmark of good practices regarding investment facilitation, with ground-level input by practitioners;(3)keep in mind that the framework can help domestic reforms; (4) require transparency for home country measures and investors’ corporate social responsibility commitments; and (5) ensure that the framework provides for technical assistance to developing countries (and especially the least developed among them) for negotiating and implementing such a framework. Developing countries in particular need to seek to advance these issues. If substantial progress toward an explicit development dimension can be made (or, at a minimum, some of these issues can become part of a firm built-in agenda for future negotiations), a multilateral framework on investment facilitation for development would create a value-adding instrument in the FDI tool-box that is currently available in the international investment area.

Towards G20 Guiding Principles on Investment Facilitation for Sustainable Development

There is growing support behind an international framework to facilitate investment for sustainable development. This policy brief suggests that the G20 consider adopting guiding principles on investment facilitation for sustainable development, to help ensure that these efforts result in an effective, coherent, and development-oriented outcome. To this end, this brief proposes guiding principles to: (1) orient investment facilitation, (2) facilitate sustainable FDI, (3) integrate facilitation throughout the investment lifecycle, (4) engage in multistakeholder consultations, (5) ensure shared responsibilities, (6) encourage cooperative activities, (7) adopt a whole-of-government approach, (8) focus on national efforts within a multilateral framework, and (9) support capacity building coupled with flexibility.

Local Investment Climate and the Role of (Sustainable) FDI: The Case of Georgia

The article focuses on the role of FDI in Georgia’s economic development for the last decade. To attract as much FDI as possible a proper investment climate should be on the place - institutional, policy and regulatory environment. Well developed investment climate is the chance and motivation for both, local economy and foreign companies, to generate maximum income, create new work places and improve the quality of life. FDI trend is one of the best indicators of country’s economic sustainability and its attractiveness. Especially for small and developing countries, the amount of FDI matters, therefore most of such countries are trying to compete with each other through improving their investment climate according to different world famous indexes. As a result of impressive reforms since 2003, Georgian economy was benefited with large invasion of FDI, however the level of per capita GDP is still law in comparison to Eastern European countries and it should be improved. The main idea of the paper is to show a real linkage between FDI and employment ration, on the case of Georgian economy.

Foreign direct investment in times of crisis

The paper compares the current FDI recession with FDI responses to past economic crises. While the decline in outflows from developed countries has been similar in magnitude to that in previous recessions, the recovery in FDI has been much slower than in the past. Inflows to emerging markets, which remained stable during previous economic crises, have experienced an overall decline. Both patterns indicate that the global scale of the current crisis has had a different and more marked FDI response than after earlier individual country crises. Compared with other global economic downturns since the 1970s, the current FDI recession has also been greater in magnitude. (The exception to this was the large FDI plunge in the early 2000s, despite the much smaller economic crisis at the time.) To the extent past FDI patterns can provide relevant insights to the current FDI slump, this could indicate that global FDI flows may remain below 2007 levels until at least 2014. The paper concludes by recommending policymakers to not just further liberalize FDI regimes – the typical response to earlier crises – but rather to use the downturn to completely rethink their FDI policies, with an enhanced focus on promotion of “sustainable FDI”.