Total Foreign Direct Investment Research Articles

Investors’ reaction to banning IFRS use by domestic firms in alternative market

AbstractThis paper analyses the regulatory context, i.e., how IFRS preparers investing in Poland react to banning IFRS use by domestic firms in the alternative trading market (NewConnect) after six years of regulatory arbitrage. In other words, it studies their portfolio investment and foreign direct investment (FDI) outward sensitivity to the end of regulatory arbitrage opportunity given by the alternative market’s regulation in the country where accounting law limits IFRS use to regulated markets and business groups where the parent company uses IFRS. The contribution is built on the natural experiment of prohibition of domestic IFRS preparers issuing shares on the alternative (not-regulated and cheaper) trading market after 2012. The originality is delivered by implementing a de facto measure of IFRS adoption by foreign investors to identify a 69% growth rate of IFRS preparers investing in Polish firms in 2012 (317% growth of Swedish investors and 219% of Portuguese) that dropped to 8% in 2013 and 3% in 2018. Thus, we check whether investing decisions consider opportunities to gain funds or attract other investors and build trust through IPOs on the unregulated market dedicated to start-ups and engaged in R&D activity. We use difference-in-differences, GMM dynamic panel-data analysis with Arellano-Bond and Arellano-Bover/Blundel-Bond estimators for the Knowledge-Capital model on portfolio investment, outward FDI overall, and three FDI components based on debt, equity, and earning reinvestment in 2003–2019. We found that banning IFRS use by domestic firms in the alternative market discourages portfolio investments, debt-based FDI flows and FDI earnings reinvestment. Also, total FDI and equity-based FDI from countries with more IFRS preparers have been reduced since 2013 due to the IFRS ban for domestic firms.

Foreign direct investment in Singapore: the case of Pharmaceutical & Biological Products sector

Motivation: The motivation for the study was the fact that despite of being a small country Singapore is one of the largest recipients of foreign direct investment (FDI) in the world. It is also the location of the largest multinational enterprises (MNEs) in the Pharmaceutical & Biological Products sector.Aim: The objective of this article is to identify and assess the FDI scale and structure in Singapore in the years 1990–2022, with a focus on the Pharmaceuticals & Biological Products sector, and to show Singapore as an FDI location against the background of Asia and the world.Materials and methods: The article uses secondary data from the World Investment Report published annually by the United Nations Conference on Trade and Development (UNCTAD) and statistics published by the Department of Statistics Singapore (DOS). The study uses statistical and economic analysis, comparison, analogies, synthesis, and the method of measuring and aggregating data.Results: Singapore is one of the largest recipients of FDI not only in Asia, but also in the world. In 2022, Singapore’s share of FDI inflows to Asia was 21.3%, and its share of global FDI inflows was 10.9%. From 1998 to 2007, FDI stock in the Pharmaceuticals & Biological Products sector accounted for a significant share of total FDI stock in Singapore and the manufacturing industry, reaching over 40% in 2007. Since then, the share of the analyzed sector has been seeing a downfall. At the end of 2022, the share of FDI in analyzed sector was 4.9% of the FDI in the manufacturing industry and 0.6% of the total FDI.

The nexus between FDI and human development: non-linear evidence from South Asia

PurposeHuman development is critical for fostering economic growth and development. Given the importance of human development, this study examines the asymmetric impact of Foreign Direct Investment (FDI) on human development by decomposing total FDI into positive and negative shocks in five South Asian countries from 1990 to 2021.Design/methodology/approachThe study uses the panel Non-linear Autoregressive Distributive Lag model (NARDL) to examine asymmetric long and short-run effects of FDI. Further, the direction of causality between HDI and FDI is examined using the recently developed (Joudis et al., 2021) panel granger non-causality test.FindingsThe positive and negative FDI shocks positively impact HDI, but positive shocks have a higher effect than negative shocks in the long run. The Wald Test rejects the long-run symmetric effect, confirming the asymmetric relationship between FDI and human development. More importantly, causality results reveal the FDI-led HDI and HDI-led FDI development in South Asia.Practical implicationsFDI should be encouraged by formulating a well-tailored policy intervention. The development policies should be interlinked with FDI policies. Absorptive capacities such as infrastructure facilities, a threshold level of human capital, and institutions should be strengthened to attract higher FDI into high-tech sectors.Originality/valueUnlike the previous empirical studies, this study provides asymmetric evidence between FDI and human development in South Asia.Peer reviewThe peer review history for this article is available at: https://publons.com/publon/10.1108/IJSE-05-2023-0380.

Trend of Foreign Direct Investment in Tanzania's Real Estate Industry From 2000 - 2020: A Systematic Review

Foreign direct investment (FDI) has become an area of concern to many developing nations due to the economic benefits it presents to the host nation. Despite the notable growth and potential of the Tanzanian real estate market, there is lack of comprehensive, empirical studies that analyze the specific patterns of FDI inflows in the real estate industry in Tanzania over an extended period and their contributions to national GDP and other economic indicators. This systematic review aims to examine the trend of foreign direct investment (FDI) in Tanzania’s real estate industry from 2000 – 2020. Further, this review helps to determine the contribution of FDI to growth of GDP and other economic indicators in the country. Result shows that there was an irregular trend of FDI inflows in Tanzania’s real estate activities with various asymmetrical decrease and increase throughout the period from 2000 – 2020. However, the FDI inflows in real estate activities is not significantly associated with national GDP, national GDP growth rate, total FDI inflows in the country or contribution of the real estate activities in national GDP. There was a higher growth rate (between 4.2% - 7.5%) of real estate activities from 2000 – 2010, but was followed by a sharp decline to less than 2% in 2011 and then a steady growth rate of above 4% from 2015 – 2020. The percentage shares of GDP by real estate activities was relatively higher and steady from 2000 – 2010, followed by sharp decline from 2010 – 2011 and further decrease towards 2020. Further analysis indicated that there was a general increase in contribution of real estate activities in national GDP from 2000 – 2020. It is concluded that, FDI inflows in Tanzania’s real estate activities show an irregular trend with various asymmetrical decrease and increase throughout the period. The annual growth rate (%) of real estate activities in national GDP displays an irregular trend from 2000 – 2020. Further, there is a general increase in contribution of real estate activities in national GDP during the review period.

Analysıs of Foreıgn Direct Investment Policies and of the Performance of FDI Flows into Türkiye

The purpose of this paper is to overview Foreign Direct Investment (FDI) policies and legal framework over the years in Türkiye and analyze the performance of FDI inflows to the country by using total and sectoral FDI data over the period 1970-2022. With the recognition of positive spillover effects of FDI in bringing foreign exchanges, as well as new technologies, managerial and marketing skills to domestic industries, Türkiye opened its economic activities to foreign capitals by adopting liberal FDI laws and regulations in 1980, 1989, 2003 and 2012. Our study shows that immediately after these years, both aggregate FDI inflows and their sectoral distributions in Türkiye has changed dramatically. For instance, after the implementation of the FDI law in 2003, the service sector attracted the most of total FDI inflows.

The gravity of Offshore Financial Centers: Estimating real FDIs using a binary choice model

Fiscal and regulatory arbitrage opportunities in Offshore Financial Centers (OFCs) materially distort the economic analysis based on cross-border capital flows. However, despite its significance, there is limited information on the true scale of this phenomenon. This paper focuses on Foreign Direct Investments (FDIs) and fills this gap by using an extensive list of FDIs determinants and estimating a gravity-like binary choice specification to assess how much bilateral FDIs are driven by economic integration motives versus profit shifting opportunities. We find that the share of so-called phantom FDIs, after rising in 2010–15, stabilized at around 40% of total FDIs in recent years and that this share is systematically larger in OFCs, reconciling available evidence on the abnormal amount of recorded FDIs in these countries.

The Analysis of the Influence of Foreign Direct Investment and Domestic Direct Investment on Economic Growth in the Province of Bengkulu


 
 
 
 Investment is one of the diverse factors influencing the economic growth of a region. This research focuses on foreign and domestic direct investment in the districts and cities of the Bengkulu Province. The aim of this study is to make a significant contribution to improving the welfare of the community in this region. Additionally, the research provides guidance to policymakers in developing effective investment strategies. The method employed in this research is quantitative, utilizing the EViews software. The study uses the values of the total Foreign Direct Investment (FDI) and Domestic Direct Investment (DDI) collected from the Bengkulu Province's Central Bureau of Statistics (BPS). It was found that FDI does not have a significant impact on economic growth, in contrast to DDI, which significantly contributes positively to the economic growth of the Bengkulu Province. It is important to note that this research was conducted in a single region and only utilized two independent variables.
 
 
 

Удосконалення методики оцінки інвестиційної безпеки держави з урахуванням «кругових» інвестицій

The article discusses the features of «round tripping» investments that come to the country in the form of foreign direct investment (FDI), but in its essence is the return of previously withdrawn domestic capital abroad, mainly to offshore jurisdictions. The author suggests that there is a significant impact of «round tripping» investments on the investment security of the State, taking into account the motives of their formation and a significant illegal component, the absence of additional effects from attracting these investments into the economy. It is proposed to supplement the system of indicators of investment security of the State with the indicator «share of «round tripping» investments in the total volume of FDI (excluding reinvested capital)». To find out the directedness of the relationship between this indicator and the country’s economy, a regression analysis based on the data of 2010–2022 was applied. As a result of the analysis, a direct relationship between GDP in actual prices and GDP per capita, as dependent variables, and the share of «round tripping» investments in total FDI as an independent variable, has been identified. The article assesses the level of investment security of Ukraine in 2015–2021 taking into account the share of «round tripping» investments in the total volume of FDI (excluding reinvested income) based on the calculation of the integral indicator. The results of the calculation of the sensitivity coefficients of the integral indicator to changes in indicators testified to the largest impact of «round tripping» investments on the state of investment security of Ukraine in 2021. The carried out study confirmed the expediency of improving the methodology for assessing the investment security of the State by supplementing the system of indicators with the indicator of the share of «round tripping» investments in the total volume of FDI (excluding reinvested income).

The contribution and influence of total external debt, FDI, and HCI on economic growth in Indonesia, Thailand, Vietnam, and Philippines

The goal of this research is to ascertain how much foreign debt, foreign investment, and HCI have contributed to the growth of the economies of the four ASEAN nations. This research uses the Panel Vector AutoRegression Model (PVAR). The PVAR method is a method used to analyze the relationship between several variables that change over time. This method combines two approaches, namely Vector Autoregression (VAR) and panel data. The type of data used in this research is secondary data, an annual time series with a time range from 2000 to 2020 for all cross-section variables taken from four countries in ASEAN, namely Indonesia, Thailand, Vietnam and the Philippines. The World Bank provided the data for this study. The variables examined in this study are GDP, total foreign debt, foreign debt, FDI, and HCI which are represented by education and health variables. From this study, we find that the relationship between variables varies, such as gross domestic product which has a significant negative relationship with FDI but has a significant positive relationship with debt service. In addition, there is a significant and negative relationship between GDP and total foreign debt, GDP is also negatively and significantly related to education and health variables, which means that GDP is also negatively and significantly related to HCI. It can be concluded that in the four countries we studied, an increase in debt service will increase people's consumption capacity which will lead to an increase in economic growth, but in this study total foreign debt and debt service have a negative relationship with gross domestic product. This research shows that foreign direct investment (FDI) has a significant positive relationship with the gross domestic product (GDP) of ASEAN member countries, especially Indonesia, Thailand, Vietnam and the Philippines. Therefore, it is recommended that the governments of ASEAN member countries jointly determine foreign investment policies and manage their foreign debt to increase economic growth in the Southeast Asia region. In addition, it is recommended that the governments of ASEAN member countries pay more attention to their fiscal policies, because increasing debt service costs can reduce economic growth. This can be seen when there is a surge in foreign debt which is disproportionate to the ability to pay ASEAN member countries.

Spillover effects of FDI inflows on output growth: An analysis of aggregate and disaggregated FDI inflows of 13 MENA economies

AbstractThis paper examines the effect of foreign direct investment (FDI) inflows on overall growth, as well as its sector‐specific spillovers in the Middle Eastern and North African region during the period from 2000 to 2020. Our major innovation is our ability to disaggregate FDI into primary, secondary and tertiary and examine their individual impact on growth, as well as their sector‐specific spillovers by using dynamic panel GMM methodology. We find prima facie evidence that total FDI significantly stimulates growth. However, when we turn to the disaggregated FDI data, primary sector FDI adversely affects the gross domestic product (GDP) growth in the service sector and overall GDP growth. On the other hand, secondary FDI has a ‘double‐edged’ effect, benefiting its own sector (the service sector's GDP growth), but not other sectors. In contrast, service sector FDI stimulates GDP growth in mining, manufacturing and service sectors, thereby enhancing overall economic growth. Our findings have important policy implications regarding the incentives provided by governments to encourage FDI, which need to be fine‐tuned to attract certain types of FDI (tertiary), with less focus on the primary sector

Regional Distribution of Foreign Direct Investment in India

The tremendous rise in Foreign Direct Investment (FDI) inflows following the economic reforms in 1991, has been one of the most prominent features shaping the behavior of the Indian economy in the past three decades. The present study is based on secondary data and the objective is to examine the trends in FDI inflows to India following the global financial crisis, for the period 2009-2010 to 2021-2022. Additionally, the distributional pattern of FDI among the regions and states of India is also analyzed, using the data for 30 states/territories. The results reveal that total FDI inflows have increased in substantial amounts over the period from US$ 37,745 million in 2009-2010 to US$ 84,835 million in 2021-2022. Maharashtra and Karnataka have surpassed all other states in FDI equity inflows over the period from October 2019 to September 2022. These two states have commanded 50 percent of the total FDI, whereas the regions in central, eastern, and northeast India have received less than 3 percent of the total FDI equity inflows. Thus, the regional disparities in the distribution of FDI are quite visible post-analysis. It is suggested that government should focus on making investor-friendly policies to tap the potential of regions neglected by foreign investors.

Shadow economy and FDI: the role of corruption and land resource

PurposeThis research examines how shadow economy affects foreign direct investment (FDI).Design/methodology/approachThe study utilizes a panel dataset including 124 nations between 1997 and 2015. Information on shadow economy, FDI and macro-economic characteristics is obtained from the United Nations Conference on Trade and Development (UNCTAD) and World Bank database. Various econometric methods are employed, such as the panel ordinary least squares (OLS) with fixed-effect estimator and the two-step system generalized method of moments estimation.FindingsThe findings of the study illustrate that shadow economy negatively influences total FDI inflows, and this adverse impact is mainly driven by greenfield investments – a component of FDI. Moreover, the authors provide evidence that the shadow economy has more devastating influences on FDI inflows in countries with higher corruption levels and fewer land resources.Practical implicationsOverall, this research suggests an important policy implication that the shadow economy should be controlled more strictly since it harms the FDI inflows, especially greenfield investment.Originality/valueThis research is among the first attempt of evaluating the effect of shadow economy on different FDI types. Furthermore, it examines how the shadow economy–FDI inflows nexus is changed when considering factors including corruption and land resource.

The Role of FDI in the Sustainable Development of the European Union

This paper aims to examine the role of international business behavior in the sustainable development of the European Union (EU) and to answer two questions: (1) To what degree could international business contribute to the development of a “green economy” under the uncertainty caused by the COVID–19 pandemic?; (2) In what way could host countries attract “green” and socially responsible foreign direct investment (FDI)?
 The statistical analysis of international business involvement in environmentally harmful sectors/industries of the EU economy indicates that the share of such investments in most member states did not exceed 20% of the total FDI stocks between 2015 and 2020. The structure of investments changed in half of the analyzed countries towards sectors/industries that were less harmful to the environment. These changes and high requirements for domestic and foreign companies within the framework of the EU’s environmental policy allow us to conclude that international business contributed to the ecological transformation of the EU.
 On the other hand, changes in the structure of FDI stocks located abroad by the EU Member States in environmentally harmful sectors/industries were multidirectional. Six of the EU states remained net exporters of direct investment in these sectors/industries. The involvement of foreign direct investors in the new EU Member States in sectors that are important for implementing the Sustainable Development Goals (SDGs) of the 2030 Agenda was not very high. It was characterized by high volatility and did not play a significant role in their economies. Attracting “green FDI” and socially responsible investments requires changes in policy towards foreign investors. They should include facilitating foreign investment, including investments aimed at sustainable development, incentives for investors to engage in “green investments”, and making investment agreements more flexible to combat climate change.

Impact of Chinese FDI Stock on Urban Development of South African Cities

The relationship between Foreign Direct Investment (FDI) and the indicators of economic growth of the host country has been a much-debated issue among researchers and policymakers. However, there seems to be a positive response from host countries to FDI inflows as evident from a long history and growth of FDI over the recent years. In recent years, China has established itself as one of the biggest investors with its outward investment policies, especially in the African and Asian continents. Most of the recent investments by China have focused on the infrastructure development of the host country, specifically South Africa. The Chinese FDI stock in South Africa has been increasing each year from 44.7 million USD in 2003 to 5.4 billion USD in 2020. This report examines if there I s any positive impact of Chinese FDI Stock in the Urban Development of South Africa. An Urban Development Index (UDI) has been formulated for the study using Principal Component Analysis of six different indicators of Urban Development in South Africa. Multiple regression analysis is then conducted using UDI as the dependent variable, Chinese FDI Stock as the Independent Variable, and Total FDI per Capita as the Control variable. The study concludes that there is a significant positive impact of Chinese FDI Stock on the Urban Development Index of South Africa.

Official visits and foreign direct investment

This paper examines the effect of official visits by U.S. Presidents and Secretaries of State on foreign direct investment inflows. The key difficulty in determining a causal effect is the issue of endogeneity. To address potential endogeneity, we use the Endogenous Treatment model (ETM). The estimation results provide evidence that the official visits of U.S. Presidents have a statistically significant positive effect on both foreign investment inflows from the U.S. and on total foreign direct investment inflows. This is robust even after the inclusion of other control variables identified by the literature as confounding factors for foreign direct investment. When we examine the effect of different types of visits, the results show that bilateral meetings during the official visits of U.S. Presidents have a statistically significant positive effect on both foreign investment inflows from the U.S. and total foreign direct investment. These results imply that the visits of U.S. Presidents offer a signal of the confidence of American administrations in the host country, which may in turn encourage American and non-American firms to invest in that country.

The impact of economic sanctions on foreign direct investment: empirical evidence from global data

PurposeThis study investigates the impact of global economic sanctions on foreign direct investment (FDI).Design/methodology/approachData were gathered from several sources, including the United Nations Conference on Trade and Development, the Global Sanction and the World Bank database, to build a dataset that consists of 172 countries during the period 2003–2019. The panel ordinary least square with a fixed-effects estimator was exploited to achieve the research objective.FindingsThe research findings reveal that sanction exerts a detrimental effect on the total inflows of FDI and its components. Regarding different types of sanctions, while military and trade sanctions have little or even no impact on greenfield investment, they have more adverse and sizable effects on cross-border mergers and acquisitions (M&As). The authors further show that sanctions exert devastating influences through the infrastructure and economic development channels.Practical implicationOverall, this study implies that a closer look at particular types of FDI is required when implementing policies as different types of FDI may be affected differently by changes in the economy, such as economic sanctions.Originality/valueThis paper is the first empirical study that critically investigates the impact of sanctions on the total inward FDI flows and its two components: greenfield investment and cross-border M&As. It then explores how the sanction–FDI nexus varies depending on several country-level economic factors to understand better how sanctions and different types of sanctions are related to international trade and relations.

Trade and Foreign Exchange Liberalization, Investment Climate, and FDI in the MENA Countries

Despite some progress in economic policy – in macroeconomic stability in the 1980s, and in structural reforms in the 1990s – the MENA countries have failed to attract foreign direct investments (FDI). This may be due to several factors. In this paper we empirically verify from a panel of 72 countries – among which are 8 MENA economies – that, during the 1990s, the low level of trade and foreign exchange liberalization compared to East Asia and Latin America played a determinant role in the low level of total FDI in the MENA economies, particularly in manufacturing. The paper also highlights the role of other factors, such as physical infrastructure, political environment and macroeconomic conditions, in explaining total FDI flows to the different regions. These results stress the importance of accelerating the pace of reform in the MENA economies.

FDI and Economic Growth: A new Look from the Sectoral Perspective

Abstract This paper investigates the impact of foreign direct investment (FDI) on economic growth in a sample of 10 ex-socialist European and Asian countries. While the link between FDI and economic growth has been extensively investigated in empirical literature, this paper contributes to this literature by econometrically investigating the effects of FDI inflows in specific sectors using the panel data estimation techniques. In addition to confirming the positive impact of total FDI inflows on economic growth, using the WiiW (the Vienna Institute for International Economic Studies) FDI database, which disentangles the FDI data across different industries, the paper finds significant effects of FDI inflows in manufacturing on growth, whereas FDI inflows in other sectors are only sporadically statistically significant. This finding serves as a basis for further investigation of the specific subsectors (NACE 2-letter classification) within manufacturing, and the empirical investigation finds that not all FDI inflows within manufacturing enhance economic growth.

Effect of Aid for Trade and Foreign Direct Investment Inflows on the Utilization of Unilateral Trade Preferences Offered by the QUAD Countries

This paper investigates the effect of Aid for Trade (AfT) flows and foreign direct investment (FDI) inflows, as well as their interplay on the utilization of non-reciprocal trade preferences (NRTPs) offered by the Quadrilaterals (i.e., QUAD countries, which are Canada, the European Union, Japan, and the United States). Two major blocks of NRTPs provided by the QUAD countries have been considered, namely, the Generalized System of Preferences (GSP) programs and other NRTPs. The analysis has covered 114 beneficiary countries of these NRTPs and the period of 2002–2018. Several findings have emerged from the analysis. Total AfT flows and FDI inflows contribute to enhancing the utilization rate of both GSP programs and other NRTPs, and are strongly complementary in affecting positively the utilization of both types of NRTPs. Finally, beneficiary countries’ level of export product diversification matters for the effect of both AfT flows and FDI inflows on the utilization of NRTPs. The conclusion section discusses the implications of these findings.

Analysis of Influencing Factors of Total Foreign Direct Investment Based on Grey Relational Analysis

After China joined the WTO, the level of China’s opening to the outside world has gradually increased, and the total foreign direct investment has shown an upward trend. The inflow of high-quality foreign capital will help promote the growth of China's consumption, investment and total imports and exports, and stimulate economic development. At the same time, the growth of total foreign direct investment can also further promote the level of China's opening to the outside world. This paper uses the grey relational analysis method to conduct an empirical analysis on the index system composed of the influencing factors of the national total foreign direct investment. The research shows that each index in the index system has different degrees of influence on the total foreign direct investment. This article starts from the influencing factors, and formulates corresponding suggestions for the country to formulate the opening-up policy.