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31. Structural Changes and the Impact of FDI on Singapore’s Manufacturing Activities

Author:
Shandre Mugan Thangavelu
Publication Date:
06-2023
Content Type:
Working Paper
Institution:
Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:
This chapter examines the investment and foreign direct investment (FDI) policy of Singapore’s economy in terms of the structural transformation of the economy from 1998 to 2018. The study also examines the impact of FDI on the productivity of the Singapore manufacturing industries in a panel framework from 2017 to 2019. The results indicate that FDI activities have a positive impact on labour productivity. The export activities of multinational businesses have a positive impact on labour productivity. We also observe agglomeration effects from FDI activities (average FDI activities over 3 years) in Singapore’s manufacturing industries. However, we observe a negative impact of outsourcing labour productivity. The study also derives policy implications for forward-looking policies in terms of the position of Singapore in the global production value chain.
Topic:
Foreign Direct Investment, Manufacturing, and Industry
Political Geography:
Singapore and Southeast Asia

32. Timing Is Everything: Italy Withdraws from the Belt and Road Initiative

Author:
Aurelio Insisa
Publication Date:
12-2023
Content Type:
Commentary and Analysis
Institution:
Istituto Affari Internazionali
Abstract:
After months of rumours and speculations, on 6 December 2023, the Italian newspaper of record, the Corriere della Sera, broke the news that Rome had finally withdrawn from China’s Belt and Road Initiative (BRI), via a note sent to Beijing three days earlier.[1] In the absence of an explicit request to withdraw before the end of December, the memorandum of understanding (MoU) instrumental to Italy’s participation in the BRI would have automatically been renewed for another five years starting from March 2024. Italy’s subdued withdrawal from the BRI marked the epilogue of a long, laborious, yet ultimately successful diplomatic process that reflected a reassessment of its bilateral relations with China. The origins of this reassessment can be traced back to the government led by Mario Draghi between 2021 and 2022. In June 2021, during the first post-pandemic, post-Trump G7 Leaders’ Summit in Carbis Bay, Draghi stated that his government would “examine […] carefully” the MoU.[2] Draghi’s words reflected a deeper awareness of the broader implications of Beijing’s assertiveness in international politics and a close alignment with the Biden administration in Rome. This shift also reflected the absence of tangible economic benefits from BRI membership for Italy, although this was also due to the devastating effect of the Covid-19 pandemic on the designed trajectory of Sino-Italian economic relations.[3] Furthermore, the security-driven decision of the Draghi government to repeatedly exercise its “golden power” to veto Beijing’s investments in Italy’s strategic sectors contributed to shaping the MoU’s outcome.[4] This course correction in Rome’s China policy survived the fall of the Draghi government in July 2022 and the victory of the centre-right coalition led by Giorgia Meloni and her Fratelli d’Italia (Brothers of Italy, FdI) party in the legislative elections of September that year. After all, Meloni and her party had consistently opposed the MoU with China from the very beginning, a decision arguably also linked to the perceived need to bolster the party’s credentials as a reliable partner in the eyes of Washington – as in the case of the clear support for Ukraine well before the September electoral victory.
Topic:
Foreign Policy, Foreign Direct Investment, Belt and Road Initiative (BRI), and International Politics
Political Geography:
China, Europe, Asia, and Italy

33. The Effects of Robotization on Foreign Direct Investment

Author:
Sungwoo Hong, Wongi Kim, and Yeo Joon Yoon
Publication Date:
08-2023
Content Type:
Working Paper
Institution:
Korea Institute for International Economic Policy (KIEP)
Abstract:
This study aims to investigate the effects of robotization on foreign direct investment (FDI). We address this research question by providing a theoreti-cal prediction derived from a simple model and then empirically testing our prediction. Theoretically, we found that an exogenous rise in industrial robots depresses both the robot rental rate and the domestic cost of task execution. Thus, it is more profitable to perform more tasks at home, leading to a de-crease in FDI. Empirical results are summarized as follows. First, an increase in robotization in source countries negatively affects outward FDI. Second, this negative effect is not consistent across global regions.
Topic:
Economics, Foreign Direct Investment, and Industrial Structure
Political Geography:
Global Focus

34. Mekong Subregion-RoK Cooperation to Build Stable Supply Chains in Southeast Asia

Author:
Sungil Kwak, Jaewan Cheong, Mingeum Shin, and Jegook Kim
Publication Date:
08-2023
Content Type:
Policy Brief
Institution:
Korea Institute for International Economic Policy (KIEP)
Abstract:
The Mekong subregion has emerged as a key hub in the global value chain (GVC), driven by a surge in foreign direct investment (FDI). This development is rooted in the Mekong subregion's robust economic growth, positioning it strategically amid the ongoing competition between the United States and China for global hegemony. The RoK recognizes the strategic significance of the Mekong subregion and has embarked on cooperative efforts in this context. We delve into the potential of harnessing the Mekong subregion to enhance RoK's supply chain diversity. While it may pose challenges for the Mekong subregion to promptly function as a target for RoK's supply chain diversification due to its developmental and infrastructural status, we proactively explore potential avenues of RoK-Mekong cooperation to determine feasibility.
Topic:
Foreign Direct Investment, Economic Growth, Global Value Chains, and Supply Chains
Political Geography:
Asia, South Korea, and Southeast Asia

35. How does the level of success of a transition of power impact Foreign Direct Investment in African countries?

Author:
Maria Fossas, Jack Moore, and Alexandra Tomlinson
Publication Date:
05-2023
Content Type:
Journal Article
Journal:
Journal of Public and International Affairs (JPIA)
Institution:
School of Public and International Affairs (SPIA), Princeton University
Abstract:
Transitions of power mark an inflection point in any society. They come about in all forms—elections, successions, coups, and conflicts—but in each case, it is an instance of a country embarking on a new path. In the field of development economics, it is thus essential to understand how the level of success of these power transitions impact the development of the nation. Specifically, the authors of this paper set out to determine to what extent change in foreign direct investment flows can be explained by the level of success of a transition of power. We conclude that maintaining or increasing good governance practices during a transition of power is a significant explanatory factor for changes in Foreign Direct Investment (FDI) and discuss the potential policy implications.
Topic:
Development, Economics, Foreign Direct Investment, Governance, and Transition of Power
Political Geography:
Africa

36. Foreign Linkages, Innovation & Productivity: Evidence from Enterprise Surveys

Author:
Anmol Kaur Grewal
Publication Date:
09-2023
Content Type:
Working Paper
Institution:
Centre for Trade and Economic Integration, The Graduate Institute (IHEID)
Abstract:
This paper estimates a three-stage structural model of how foreign linkages affect innovation which in turn affects firm productivity. Using harmonized firm-level data from the World Bank Enterprise Surveys, I construct a panel dataset for 47 developing countries spanning 2003 to 2019. I distinguish between four types of foreign linkages (exports, imports, inward foreign direct investment (FDI) and the use of foreign-licensed technology), and two types of innovation (product innovation and process innovation). To mitigate concerns regarding sample selection and endogeneity biases, I employ advanced panel data methods. In the first stage, I find that being an exporter, using foreign inputs, and using foreign-licensed technology makes firms more likely to invest in R&D, relative to other firms. I also find evidence of sample selection bias which is corrected by using a two-step Heckman selection model. In the second stage, I find that while increases in the R&D intensity increase the probability of product innovation, they have no statistically significant effect on the likelihood of process innovation. In the third stage, I find that product or process innovation is associated with increases in firm-level productivity. These results remain robust across alternative measures of innovation and firm productivity.
Topic:
Development, Foreign Direct Investment, Exports, Innovation, Imports, Productivity, and Foreign Linkages
Political Geography:
Global Focus

37. Securing Foreign Markets: Exports, Relational Specificity and New Investment Locations

Author:
Giorgia Giovannetti, Gianluca Santoni, and Giulio Vannelli
Publication Date:
02-2023
Content Type:
Working Paper
Institution:
Centre d'Etudes Prospectives et d'Informations Internationales (CEPII)
Abstract:
In this article we examine how the need to secure profit streams from exports has affected the location choice of new foreign investments by French manufacturing firms. Motivated by the observation that most firms entering a new foreign country do not establish a production unit there or decrease their exports, we develop a simple theoretical framework to guide our analysis and provide empirical evidence to support this “market securing” mechanism. Our results confirm that companies tend to locate new investments in countries that account for a larger share of their past exports; allowing for better monitoring of the foreign market, the investment prevents the disruption of the relationship, whose impact on profits would be more detrimental in the case of more important foreign partners. A 10 percent increase in bilateral exports increases the probability of investing by 3.4 percent. Consistent with our mechanism, given the same volume of exports, firms prefer countries that purchase goods with higher relational specificity as finding new buyers for these goods would imply higher costs if the relationship was broken.Exporting at least one good with relational specificity above the 75th percentile increases the probability of investing by 2.2 times compared to exporting more generic goods (below the 50th percentile).
Topic:
Markets, Foreign Direct Investment, Investment, Exports, and Manufacturing
Political Geography:
Europe and France

38. What Will It Take for Jordan to Grow?

Author:
Tim O'Brien, Thảo-Nguyên Bùi, Ermal Frasheri, Fernando Garcia, Eric Protzer, Ricardo Villasmil, and Ricardo Hausmann
Publication Date:
03-2022
Content Type:
Working Paper
Institution:
The John F. Kennedy School of Government at Harvard University
Abstract:
This report aims to answer the critical but difficult question: "What will it take for Jordan to grow?" Though Jordan has numerous active growth and reform strategies in place, they do not clearly answer this fundamental question. The Jordanian economy has experienced more than a decade of slow growth. Per capita income today is lower than it was prior to the Global Financial Crisis as Jordan has experienced a refugee-driven population increase. Jordan’s comparative advantages have narrowed over time as external shocks and responses to these shocks have changed the productive structure of Jordan’s economy. This was a problem well before the country faced the COVID-19 pandemic. The Jordanian economy has lost productivity, market access, and, critically, the ability to afford high levels of imports as a share of GDP. Significant efforts toward fiscal consolidation have further constrained aggregate demand, which has slowed non-tradable activity and the ability of the economy to create jobs. Labor market outcomes have worsened over time and are especially bad for women and youth. Looking ahead, this report identifies clear and significant opportunities for Jordan to strengthen new engines of export growth that would enable better overall job creation and resilience, even amidst the continued unpredictability of the pandemic. This report argues that there is need for a paradigm shift in Jordan’s growth strategy to focus more direct attention and resources on activating “agents of change” to accelerate the emergence of key growth opportunities, and that there are novel roles that donor countries can play in support of this.
Topic:
Foreign Direct Investment, Economy, Economic Growth, Trade, COVID-19, Labor Market, Inclusion, and Green Jobs
Political Geography:
Middle East and Jordan

39. Corruption, FDI, and Trade Freedom Relationship Between Turkey and Latin American Countries

Author:
Alexander Camacho Murcia and E. Murat Özgür
Publication Date:
05-2022
Content Type:
Journal Article
Journal:
Bilgi
Institution:
Sakarya University (SAU)
Abstract:
Foreign Direct Investment (FDI) has been always associated with a high level of trade openness and freedom environment, and with a lower incidence of institutional corruption. Because it is assumed that a high level of international capital mobility makes foreign investors more cautious when there is a fluctuation in political stability and institutional transparency. Most American countries (except Canada and the USA) have been always related to a lack of transparency in their institutional and bureaucratic procedures, which conduct to important levels of corruption and in consequence, to other serious issues such as prominent level of violence, or even the inequality phenomena. This study investigates whether the variables of corruption indices, trade openness and inflation rates have positive or negative effects on FDI between Turkey and American countries. For analyzing this econometric model, it was gathered information from OECD, COMTRADE, TUIK, Heritage Foundation, UNCTAD, and the World Bank Database. The observed data correspond to a decade (2005-2014) and were only taken a sample of 14 American countries. The empirical results of the present study revealed that there is a positive correlation between the trade openness index and FDI; and, it was found a positive correlation between corruption index, inflation, and FDI. The increase in the corruption index causes a 41% increase in FDI inflow.
Topic:
International Relations, Corruption, Foreign Direct Investment, Economy, Free Trade, and Transparency
Political Geography:
Turkey and Latin America

40. A Narrative of Debt Trap Vs Connectivity under CPEC: A Case of Gwadar Port

Author:
Rizwan Naseer, Qiubin Wang, and Ahmad Ali
Publication Date:
01-2022
Content Type:
Journal Article
Journal:
South Asian Studies
Institution:
Department of Political Science, University of the Punjab
Abstract:
Gwadar has been an underdeveloped city in Baluchistan but CPEC has addressed problems of education, health and electricity for local populace. The vision to convert Gwadar into a hub of trade is reaping benefits for Pakistan. China‟s investment and loans in Gwadar under the CPEC are termed as Debt Trap by the India and U.S. media outlets. Majority of the Western media, academia and policy making circles deliberately established the narrative of Debt Trap Diplomacy (DTD). Gwadar port is likely to unlock potential of connectivity with regional trade partners in West Asia-Central Asia and South Asia. This project is a win-win situation for China and Pakistan. China‟s investment in Gwadar port will improve Pakistan‟s economy, uplift Baluchistan‟s living standards by offering attractive opportunity to potential investors in Gwadar‟s free zone. China‟s investment in Gwadar is promising to bring real change in Gwadar and Pakistan in particular. Due to massive propaganda against Gwadar, desired results have not been achieved yet. This paper is based on primary as well as secondary data. Primary data has been collected from Planning Commission of Pakistan on the condition of anonymity. The main argument of the paper is that the narrative of debt trap diplomacy is false. Connectivity of Gwadar with regional countries will be a game changer in the region.
Topic:
Debt, Foreign Direct Investment, and Prosperity
Political Geography:
Pakistan and South Asia