World Investment Report Research Articles

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.

World Investment Report 2023: Investing in sustainable energy for all

World Investment Report 2023: Investing in sustainable energy for all

The effect of low rate of corporate taxation on foreign direct investments (FDI) and gross domestic product (GDP): A case study of ten selected countries (2018-2022)

This research was undertaken to examine the effect of low corporation tax rate on Foreign Direct Investment (FDI) inflow and Gross Domestic Product (GDP). Investors and multinational firms are very rational and therefore prefer to invest in countries where the cost of taxation will be at the barest minimum to maximize their profit. The study aimed to critically analyze the Corporate Income Tax (CIT) rates of the randomly selected countries of the world, and their respective impacts on FDI and GDP. The study is descriptive in nature, based on quantitative data, sourced from various reports of Statutory Corporate Income Tax Rates of Tax Foundation, World Bank and UNCTAD World Investment Report of 2022. Ex-post Facto research design was deployed; while data were analyzed with a General Linear Model of Multivariate Analysis of Variance (MANOVA) with the aid of SPSS version 25. The study found that low rate of corporation tax has a positive and significant effect on FDI as well as on GDP. That is, CIT rate is a dominant determinant for FDI and GDP of countries.

Nexus between Foreign Direct Investment (FDI) and Economic Growth (EG): A study of 10 Countries of the World (2018 - 2022)

Developing and world economies have at some point, since the birth of commerce, witnessed either of the departure or influx of Multinational Enterprises (MNEs). And to gain greater research insight if change in Foreign Direct Investments (FDI) impact on countries’ Economic Growth (EG), this research aimed to examine, with a more recent quantitative data (2018 - 2022), for any statistical nexus between FDI and EG – measured with the macro-economic index of Gross Domestic Product (GDP). In achieving this, the study deployed Ex-Post Facto research design, with data retrieved from the 2023 published United Nations Conference on Trade and Development (UNCTAD)’s World Investment Report; and World Bank National Accounts data, and OECD National Accounts Data files. Formulated hypothesis was tested with the Bivariate Pearson Product-moment Correlation Coefficient statistics, and its’ result was further validated by Bayes Factor Inference on Correlations statistics. The study found that a statistically significant and positive long-term relationship existed for all of the 10 countries of the world selected as case. Thereby concluding that FDI is indeed a key indicator that impacts EG of any country. Sequel to the findings and conclusion, this study recommends to policy-makers – particularly of developing economies, among others, the institution of flexible economic policies, attractive tax incentives, friendly business legislations, and economic and political stability measures; and the further development of their infrastructures so as attract greater MNEs.

Understanding the Relationship Between Foreign Direct Investment and Economic Growth in BRICS: Panel ARDL Approach

Foreign direct investment (FDI) has gained prominence in international economics over the past three decades. Primarily, the belief that FDI influences economic growth of the host country, set the stage for the empirical research focused on the FDI–growth nexus. The growth literature, however, reveals mixed evidence regarding the role of FDI in promoting growth. Despite the conflicting evidence, developed and developing economies have attached immense economic and political importance to FDI. It is noteworthy that BRICS (Brazil, Russia, India, China and South Africa) economies are representative developing economies and have emerged as significant FDI destinations, having witnessed an immense surge in inward FDI over the past few decades. It is against this backdrop that the present study attempts to assess the impact of FDI inflows and select macroeconomic variables, namely macroeconomic stability, human capital, financial development and trade openness (TO), on the economic growth of developing BRICS economies. The study examines both short-run and long-run relationships between FDI inflows, select macroeconomic variables and economic growth by employing the dynamic panel autoregressive distributed lag (ARDL) model, unlike most of the previous studies. For this study, secondary data covering a reference period of 32 years (1987–2018) were used. The data on GDP growth (GDPG), FDI inflows, inflation (INF), human capital, private sector bank credit (proxy for financial development) and TO have been collected from the World Investment Reports published annually by United Nations Conference on Trade and Development (UNCTAD) and World Bank (World Development Indicators). The findings revealed a long-run cointegration among FDI, host country characteristics (TO, human capital, financial development and macroeconomic stability) and economic growth in BRICS.

FDI and Wellbeing: A Key Node Analysis for Psychological Health in Response to COVID-19 Using Artificial Intelligence.

Developing countries are primary destinations for FDI from emerging economies following the World Investment Report 2022, including destinations in OECD countries. Based on three theoretical lenses and case analyses, we argue that Chinese outward FDI has impacts on wellbeing in destination countries, and that this is an important issue for psychological health in response to COVID-19. Based on the super-efficiency DEA approach, our study investigated the impact of Chinese outward FDI on wellbeing in OECD countries. We also applied a Tabu search to identify country groups based on the relationship between Chinese outward FDI and wellbeing and we developed a key node analysis of the country groups using an immune algorithm. This research has implications for public administrators in global governance and could help shape FDI policies to improve psychological health of the destination countries in response to COVID-19.

Correction to: World Investment Report 2022: International tax reforms and sustainable investment

Correction to: World Investment Report 2022: International tax reforms and sustainable investment

The Nexus between Capital Flight and Economic Growth. A Panel Data Investigation of the Mediating Role of Inflation (Kenya: 1986-2021)

Purpose: This paper investigates whether inflation moderated the relationship between capital flight and economic growth in Kenya. The study attempts to answer one question. Has the effect of capital flight on economic growth been influenced significantly by the inflation rate in Kenya?
 Design/methodology/approach – The panel data for the variables under study, collected from World Investment Reports published by World Bank, are analyzed using feasible generalized least squares method to examine the relationship between the dependent and explanatory variables over the period 1987–2018. The interaction effect has been studied to examine the growth impact of FDI in presence of host country characteristics.
 Findings – The study found out that foreign portfolio investment outflows, profit repatriations, and inflation rates had no significant effects on economic growth when the interaction variable for inflation was included in the model. Outward foreign direct investment had a significant effect on economic growth when inflation is included in the model as an interaction variable with a positive coefficient indicating they had a positive significant relationship. The interaction variable had a negative but insignificant coefficient indicating that inflation rate did not moderate the relationship between capital flight and economic growth. From the empirical findings, we can infer that capital flight did not constrain resources and subsequently did not affect economic growth negatively. We also find that inflation rate cannot be used to control or moderate the effect of capital flight on the economy and Kenya should not pursue policies geared towards using inflation to moderate this relationship.
 Originality/value – The present study provides for the first time comprehensive empirical evidence on the relationship between inflation, economic growth, and the increased rate of capital outflows in Kenya. Therefore, this study would be of prime importance for policymakers.
 Originality/value – Very few studies have been conducted to examine the nexus between inflation, capital flight and economic growth in Kenyans financial markets. Assessing the interaction of these variables in Kenya and their impact on economic growth by use of panel data methodology is an original contribution of this paper toward the existing body of knowledge.

World Investment Report 2022: International tax reforms and sustainable investment

World Investment Report 2022: International tax reforms and sustainable investment

Foreign direct investment and macroeconomic factors: evidence from Indian economy

The World Investment Report for 2017 released by UNCTAD projected that FDI inflows to developing Asian countries will increase by 15% in 2017, to $515 billion. With a boost in investor confidence in the economic outlook in major Asian economies, India is the second most preferred destination in the world as regards FDI inflows. This paper examines the relationship between FDI and macroeconomic factors, like, GDP, FER, employment, exports, and GCF for the period 1978-1979 to 2016-2017. Techniques like augmented Dickey-Fuller test, multivariate regression analysis Johansen's co-integration test, impulse response analysis and Chow breakpoint test, multiple breakpoint test and Bai-Perron sequentially determined breaks test are used. The findings suggest that there is a significant correlation between FDI and the macroeconomic factors. The results of Johansen's co-integration test reveal that there is a long run causal relationship between FDI and other variables.

АНАЛІЗ СТАНУ, ТЕНДЕНЦІЙ ЕКОНОМІЧНОГО РОЗВИТКУ ТА ПОЗИЦІЇ КИТАЮ В ГЛОБАЛЬНІЙ ЕКОНОМІЦІ

The paper is devoted to the analysis of China's position in the global economy. China became one of the fastest growing economies in the world since it’s opening to foreign trade and investment in 1979. The main factors that contributed to rapid economic growth were defined as: large-scale capital investments, rapid growth in productivity, economic reforms that led to the efficiency increasing of the economy, production growing and resources expanding for additional investments in the economy. The real annual growth of China's GDP from 1980-2022 was analyzed. From 1979 to 2017, China's real GDP grew at an average of almost 10% annually. But the COVID-19 pandemic and the measures taken to contain it caused the biggest slowdown in China's economic growth in 2020, to 2.2%. A comparison of the shares of China and the United States in the world GDP by PPP was made. Accordingly, the conclusion – it was the first case in history when China was the world's largest economy in 2017. It was determined that the United States and China are the two largest economies in the world by both nominal GDP and GDP per PPP (purchasing power parity). The US leads in nominal terms, while China leads in PPP terms, overtaking the US by 39%. Over the past few years China has become the world's largest exporter and ranks second place among the world's largest importers thanks to its huge active trade balance. According to the World Investment Report 2022 of the United Nations Conference on Trade and Development (UNCTAD), the United States and China are the main recipients of global FDI (foreign direct investments), as well as the main investors. As China continues to lead the global recovery from the adverse economic effects of the COVID-19 pandemic, foreign multinational corporations are doubling their investments in China, establishing thousands of new firms and expanding existing ones. The main recipients of Chinese FDI are Hong Kong, the US, Singapore and Australia. Hong Kong absorbs the largest amount of FDI from China and plays a special role. The distribution of Chinese FDI by sector shows that Chinese investors most prefer investments in leasing and business services, financial services and manufacturing.

ДИНАМІКА І СТРУКТУРА ГЛОБАЛЬНИХ ПОТОКІВ ПРЯМИХ ІНОЗЕМНИХ ІНВЕСТИЦІЙ

The article examines the inflow of foreign direct investment around the world, distinguishing different groups of countries. It was found that global FDI flows tend to increase in all regions of the world, despite the difficult year 2020 – the period of COVID-19, with a significant decrease in developed countries. The countries of Europe and North America contributed the most to the global decline in FDI: more than 100% and 46%, respectively. However, the decline was very uneven across regions, with Latin America and the Caribbean down 37%, Africa down 18% and developing Asia down 4%. FDI in countries with transition economies decreased by 77% compared to 2019 to $13 billion. USA. After a significant recovery in 2021, global foreign direct investment fell by 12% in 2022 to $1.3 trillion. The reason for this was the global crises that overlapped each other during a certain period of time. The decline was felt mainly in advanced economies, where FDI fell by 37% to $378 billion. We find that despite a slowdown in global FDI flows in 2022, new investment showed moderate growth. In the member countries of the Organization for Economic Cooperation and Development, FDI inflows fell by 26%, the main reason was the withdrawal of investments from Luxembourg (with the exception of Luxembourg, FDI flows in 27 European countries increased by 22%). However, this decline was partially offset by strong growth in Switzerland as well as the United Kingdom. Consequently, FDI flows to the United States decreased by 21% in 2022 and increased in other countries, including Australia, Italy and Sweden. If we single out some regions, we can conclude that the inflow of direct foreign investment to the G20 countries has decreased by 15%. While they increased by 7% in the G20 OECD countries, FDI fell by 38% in the non-OECD G20 countries, mainly due to declines in China and to a lesser extent in South Africa, compared to their peaks levels recorded in 2021. Foreign direct investment flows in Brazil increased by 68%. According to the UNCTAD World Investment Report 2023, most economies in the region have recovered FDI inflows and only a few have experienced a downturn. The largest recipients of foreign direct invest- ment in the first quarter of 2023 were the USA, Brazil and China. The main sources of FDI outflows around the world were the United States of America, Germany and China.

KAZAKHSTAN AND ITS INVESTMENT DEVELOPMENT PATH

Historically, it turned out that the state cannot successfully develop without integration into the global economy. Although such integration is often associated with risks and high costs, these short-term factors overlap with long-term benefits. Foreign direct investment (FDI) is a criterion for this integration, and over the past 30 years, policies in developing countries have been increasingly focused on attracting them. This article attempts to explore the theory of investment development path (IDP according to Dunnings’s theory) of Kazakhstan which economy was considered as transitional, and its key component, the net external investment position, the starting point for data analysis is the beginning of Kazakhstan’s transition to the market system in 1991. The objective of the article is to identify at which stage Kazakhstan is situated. Many studies have been conducted among Western scientists and so far, not a single one among Kazakh scientists. The research was conducted empirically with data mainly from periodic reports published by the United Nations Confederation for Trade and Development (UNCTAD) entitled World Investment Report and studies by the National Bank of Kazakhstan. During the research, the author found out that Kazakhstan is in the second stage of its investment development path. The outcome of the research can be used in the work of state ministries of departments and in the teaching of economic disciplines on investment activities.

INTANGIBLE ASSETS IN MODERN TRANSNATIONAL CORPORATIONS IN SERVICE INDUSTRY

An analysis of the activities of leading transnational corporations (TNCs) for the period from 2000 to 2020 showed that the transformation of the world economic order leads not only to new rules for conducting international business, but also to the occupation of prevailing positions in the world market by TNCs engaged in the service sector. Therefore, the purpose of the study was a systematic analysis of the impact of intangible assets on the growth of the competitiveness of the service sector and the increase in their market capitalization, revenue and asset value. Based on an in-depth study of statistical data, the authors identified trends that led to an increase in the share of intangible assets in the value of companies; an analysis was made of the presence of TNCs in the service sector in the ratings for assessing the level of revenue and market capitalization (based on the Fortune Global 500); comparison of indicators related to intangible assets with the human development index and the business environment, formed taking into account the existing investment climate (based on AON Empower Results, GIFT, World Investment Report); identified the most promising sectors for the use of intangible assets. Based on the results of the study, uniform principles were formed according to which the management of intangible assets of TNCs should take place, in which an important place is occupied by the use of the potential of intangible assets and the advantages of the triple helix of innovations (education - business - government).

UNCTAD: World Investment Report

<scp>UNCTAD</scp>: World Investment Report

Unctad Insights: A new framework to assess the fiscal impact of a global minimum tax on FDI

The OECD agreement in principle on a global minimum corporate income tax – Pillar Two of the Base Erosion and Profit Shifting project – is a major step in international tax regulation and coordination. Yet, its consequences for foreign direct investment (FDI) have received limited attention thus far. In the present paper, the authors detail the analytical framework developed to underpin the findings of the World Investment Report 2022: International Tax Reforms and Sustainable Investment. The paper introduces the notion of FDI-level effective tax rate (ETR). Unlike standard ETRs, FDI-level ETRs embed the profit shifting schemes of multinational enterprises (MNEs). They capture not only the taxes paid on income reported in the host country of the foreign investment but also those levied on income shifted to offshore financial centres (OFCs). The effect of Pillar Two on these two components of the tax base determines the increase in the overall tax rate faced by MNEs, which ultimately affects the investment decisions of MNEs. After empirically calibrating ETRs, profit shifting and FDI-level ETRs of more than 200 countries, the authors quantify the effect of Pillar Two on FDI-level ETRs. The results show that after the reform FDI-level ETRs are likely to increase by 2 to 3 percentage points in non-OFCs, which corresponds to an increase in the corporate income tax liability for MNEs between 14 and 20 per cent.

The Impact of Covid-19 Pandemic on FDI Flows in India: A Study

The Covid-19 epidemic has not only affected global economic activity but also disrupted foreign investment. According to the United Nations Conference on Trade and Development's (UNCTD) World Investment Report 2021, global FDI flows dropped from $ 1.5 million to $ 1 million (35%) in 2019, by about 20 percent less of 2009 after the global financial crisis. The impact on the developing economy was a moderate decline of 8 percent due to the smooth pace of FDI inflow into Asia. It has led to the development of the share of developing economies from just under half in 2019 to two-thirds of the global FDI. FDI inflows into India were $ 54,927 million in 2020-21 compared to $ 56,006 million in 2019-2020 according to data from the Reserve Bank of India (RBI). The increase in FDI flows in India is driven by slow integration and acquisition work. Sectors such as Computer Services, Transport, Digital Education, Fintech, Energy and Infrastructure have attracted investment during the violence. However, India needs to gain confidence in production and needs a lot of foreign exchange. Provincial governments and central government policies aim to assist foreign investors through various incentives and compensation.

UNCTAD Insights: The evolution of digital MNEs: an empirical note

UNCTAD first published a list of the top 100 digital multinationals in the World Investment Report 2017. This research note builds on the analysis and conceptual framework on digitalization and foreign direct investment set out in that report. It provides an updated list, allowing for an analysis of trends over the five-year period including the COVID-19 pandemic and adds new features to the data set that will be exploited in forthcoming UNCTAD work. The note describes the methodology to create the new and extended data set and points at possible avenues for further work. The purpose of the research note is to provide academic scholars with the basic elements needed to pursue further research in this field.

The interaction between FDI, host country characteristics and economic growth? A new panel evidence from BRICS

PurposeThis study aims to assess the impact of foreign direct investment (FDI) on growth in presence of host country characteristics, namely, economic stability, human capital, financial development and trade openness, in the fastest emerging Brazil, Russia, India, China, South Africa (BRICS) economies, considered to be significant FDI destinations.Design/methodology/approachThe panel data for the variables under study, collected from World Investment Reports published by World Bank, are analyzed using feasible generalized least squares method to examine the relationship between the dependent and explanatory variables over the period 1987–2018. The interaction effect has been studied to examine the growth impact of FDI in presence of host country characteristics.FindingsThe findings revealed that FDI does not exert a significant impact on the economic growth of BRICS individually but has a significant growth impact only in presence of host country characteristics. FDI on interacting with financial development, trade openness and human capital exerts a positive impact on the economic growth of BRICS economies, and on interacting with economic instability (inflation), FDI has a negative impact on growth.Practical implicationsThe study has implications for policy makers of BRICS countries who are suggested to work toward the development of financial markets, trade liberalization and human capital development to realize the positive growth impact of FDI.Originality/valueVery few studies have been conducted to examine the growth effect of FDI in BRICS economies, which are considered to be the fastest-growing economies and dominant players in the global investment landscape. Assessing the interaction of FDI with absorptive capacities/host country characteristics to study its growth impact in BRICS using long data and robust panel data methodology is an original contribution of this paper toward the existing body of knowledge.

Whether, how and why home country environments influence emerging market firm acquisition behavior

PurposeAccording to the 2019 World Investment Report, recent events in deglobalization have made many countries, especially developed markets, resist inward foreign direct investment (FDI) as ceding control to foreign countries. At the same time, many emerging market firms (EMFs) have been increasing their acquisitions in developed markets. The authors elaborate three unconventional motives that justify such acquisitions, and test whether conditions in home countries related to these motives predict the pursuit of greater or lesser equity control. Understanding how home country conditions may spur seeking greater equity control can help policymakers and business firm decision-makers improve these dynamics.Design/methodology/approachExamining data covering the period 2006–2018, the authors test hypotheses using a sample of 4,130 acquisitions by EMFs into developed markets, and test hypotheses to investigate “How does the institutional and resource environment of an EMF's home country relate to the respective EMF acquisition behavior of seeking equity control?”FindingsThe authors found that higher institutional quality, poorer factor market development, and higher capital market quality in the home country are related to higher equity positions sought.Practical implicationsAcquiring and target firm managers, along with other stakeholders, can gain insights on how to respond to acquisition opportunities by recognizing how home country conditions influence emerging market internationalizing behaviors into developed markets.Originality/valueThe compilation of this data uniquely covers 48 different emerging markets and further concentrates on the relatively less understood pre-deal phase for EMNEs entering developed markets.