Search

Begin New Search Topic Foreign Direct Investment

41. The US–Italy Economic Relations in a Divided World

Author:
Adriana Castagnoli
Publication Date:
05-2022
Content Type:
Working Paper
Institution:
Istituto Affari Internazionali
Abstract:
In 2021, bilateral trade returned to the sustained pace it had prior to the Covid pandemic. Direct investment also grew – crucially, not just Italian investment in the United States but the other way round too. While Italy’s economic ties with Russia and China remain potential hotspots, Rome has never questioned its Atlantic orientation. Nevertheless, possible austerity policies following sanctions against Russia could spread social discontent that populist parties can exploit for consensus purposes in the 2023 general election, rekindling anti-Americanism rooted in different segments of Italian society.
Topic:
Foreign Policy, Foreign Direct Investment, Economic Policy, Trade, and Energy
Political Geography:
Russia, China, Italy, and United States of America

42. FDI Spillover Effects on Innovation Activities of Knowledge-using and Knowledge-creating Firms: Evidence from an Emerging Economy

Author:
Iraj Hashi, Mehtap Hisarciklilar, Slavo Radošević, Nebojša Stojčić, and Nina Vujanović
Publication Date:
03-2022
Content Type:
Working Paper
Institution:
The Vienna Institute for International Economic Studies (WIIW)
Abstract:
The beneficial effects of innovation for firms’ performance and competitiveness are well documented, but it has been suggested in recent years that innovation regimes differ between advanced and emerging economies. While advanced economies rely on knowledge generation, their emerging counterparts follow mainly a knowledge-use regime through the application of existing knowledge and technology. Climbing up the technological ladder can be helped through spillovers from foreign investors to local firms. We investigate whether FDI spillovers influence different phases of the innovation process (from decision to innovate to productivity) among knowledge-using and knowledge-creating firms in an emerging European economy. The results show that the innovation process in emerging economies is closer to the imitation than the creation of novel products. Local firms benefit from foreign counterparts in the early phase of the innovation process. Stronger FDI effects are found among firms that undertake innovation through knowledge use rather than through knowledge generation.
Topic:
Emerging Markets, International Trade and Finance, Foreign Direct Investment, Economy, Investment, and Knowledge Systems
Political Geography:
Europe

43. FDI in Azerbaijan in 2021: Developments and Challenges

Author:
CESD Research Team
Publication Date:
04-2022
Content Type:
Working Paper
Institution:
Center for Economic and Social Development (CESD)
Abstract:
Attracting foreign direct investment is now more important for Azerbaijan than ever before. Against the background of global uncertainty, the development of the non-oil sector and the diversification of the economy have become even more priority. On the other hand, there has been a decline in oil production in recent years, and even though high oil prices, the country's revenue from energy sales is lower than compared to the period before 2014.
Topic:
Oil, Foreign Direct Investment, Economy, and Diversification
Political Geography:
Azerbaijan

44. Primer on International Investment Treaties and Investor-State Dispute Settlement

Author:
Columbia Centre on Sustainable Investment
Publication Date:
01-2022
Content Type:
Policy Brief
Institution:
Columbia Center on Sustainable Investment
Abstract:
What is Foreign Direct Investment (FDI)? FDI occurs when an individual or corporation in one country (“home state”) sets up or buys all or a significant part of a company that is incorporated in a different country (“host state”). Companies invest abroad to access land-based resources including mining, more affordable labour for instance in manufacturing, and new markets, among other reasons. Many countries seek to attract FDI in order to realize benefits in the form of tax revenues, technology transfer, jobs, and other economic linkages. The images below illustrate the concept of FDI, as well as some of the sectors and industries into which it flows.
Topic:
International Cooperation, Foreign Direct Investment, Investment, and Public-Private Partnership
Political Geography:
Global Focus

45. Foreign Firms Investment in Inter-Korean Economic Cooperation

Author:
Jang Ho Choi, Jung Kyun Rhee, Yoojeong Choi, and Dae-Eun Lee
Publication Date:
04-2022
Content Type:
Policy Brief
Institution:
Korea Institute for International Economic Policy (KIEP)
Abstract:
This paper examines various channels and issues for foreign firms to invest in inter-Korean economic cooperation with the as-sumption that inter-Korean economic cooper-ation can be resumed after sanctions against North Korea have been lifted, and the same treatment is applied to foreign firms. Foreign firms' investment in inter-Korean economic cooperation will provide a new op-portunity for foreign firms to earn stable profits, while also playing a role in further solidifying the establishment of peace on the Korean Peninsula. Now, inter-Korean rela-tions have fallen into difficulties due to sanc-tions against North Korea and the coronavirus pandemic, making it difficult to resume inter-Korean economic cooperation or to expect foreign firms to invest in inter-Korean eco-nomic cooperation. However, if inter-Korean economic cooperation is resumed, foreign firms' investment in inter-Korean economic cooperation will be prioritized.
Topic:
Foreign Direct Investment, Sanctions, Economy, and Economic Cooperation
Political Geography:
Asia, South Korea, and North Korea

46. Impacts of New International Tax System on Multinational Firms’ FDI

Author:
Sangjun Yea
Publication Date:
04-2022
Content Type:
Policy Brief
Institution:
Korea Institute for International Economic Policy (KIEP)
Abstract:
In this study, I present a theoretical model to quantitatively assess the economics impact of Pillar 1 and Pillar 2, especially focusing on the changes in the FDI patterns of multinational enterprises (MNEs). Pillar 1 offsets the incentives of MNEs' profits-shifting for tax-planning purposes, thereby reducing the inbound FDI into the countries with low corporate income tax rates. Pillar 2 burdens MNEs with 'top-up' taxes attributed from the subsidiaries in low tax countries. As the profits after tax (PAT) of MNEs shrink at the global level, innovation and R&D investment for new products will decrease, and as a result, global FDI flows will hamper.
Topic:
Economics, Foreign Direct Investment, Multinational Corporations, and Tax Systems
Political Geography:
Global Focus

47. FDI Spillover Effects: Evidence from the Philippines

Author:
Rafaelita Aldaba and Angel Derrickvhel Quejada
Publication Date:
08-2022
Content Type:
Working Paper
Institution:
Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:
Using firm-level data in manufacturing, this chapter examines the impact of foreign direct investment (FDI) spillover effects on domestic firm performance. Through knowledge spillovers, FDI inflows affect the performance of domestic firms. Overall, there is some evidence to show that horizontal and forward spillovers from FDI have a significant positive impact on the performance of domestic firms. However, in terms of backward spillovers, the impact of FDI on the performance of domestic firms is negative and significant. The diffusion of backward spillover effects to domestic firms has remained limited due to the weak competitiveness of domestic firms and their inability to absorb the technology or knowledge being transferred. To strengthen the absorptive capacity and productivity of domestic firms, the chapter suggests a more comprehensive approach that would combine industrial policy to improve and develop domestic parts and supplier firms with measures to create an environment conducive to the creation and expansion of FDI backward spillovers. These include upgrading industry participation towards higher segments of global value chains, innovation, human resource development, upskilling and reskilling the workforce, and liberalising ecozone regulations affecting the transactions between multinational corporations and companies outside the economic zones.
Topic:
Economics, International Trade and Finance, Foreign Direct Investment, and Investment
Political Geography:
Philippines and Oceania

48. Entry Mode Choice and Performance of Foreign Direct Investment Firms in Emerging Economies: Micro-evidence from Viet Nam

Author:
Linh Bui, Huyen Hoang, and Hang Bui
Publication Date:
03-2022
Content Type:
Working Paper
Institution:
Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:
Does the right entry mode choice help foreign direct investment (FDI) firms to perform efficiently in emerging economies? This study attempts to answer this question by examining the impact of the entry mode choice made by FDI firms on their post-entry performance in emerging markets. Using a dataset derived from specific firms for the period 2002–2016, this study accounts for the selection biases and inherent differences of FDI firms that affect their selection of entry strategies. The study found that, with regard to the manufacturing sector, the ownership type with a wholly owned subsidiary (WOS) had negative impacts on either the technical efficiency or the total factor productivity (TFP) of firms. Conversely, regarding all sectors in the economy, the WOS is likely to have a positive role on technical efficiency and TFP. It is also interesting to see that for firms with an equity joint venture (EJV) type, the higher proportion of capital contribution from domestic firms might lead to lower technical efficiency and TFP. It implies that the higher degree of management and control by the domestic firms compared with foreign firms would have negative impacts on the EJV firms’ performance.
Topic:
Economics, Foreign Aid, Foreign Direct Investment, and Emerging Powers
Political Geography:
Asia and Vietnam

49. Is Foreign Direct Investment Losing Clout in Development?

Author:
Axel Berger and Alexandros Ragoussis
Publication Date:
01-2022
Content Type:
Policy Brief
Institution:
German Institute of Development and Sustainability (IDOS)
Abstract:
Over the last decade, only a single projection of foreign direct investment (FDI) flows by the United Nations influential “World Investment Report” has proposed a negative outlook in the medium term. Based partly on surveys of business executives, these forecasts reflect ex¬pecta¬tions of investment growth which, however, have repeated¬ly failed to materialise. In fact, FDI flows to develop¬ing countries have remained stagnant over the past decade. Such wishful thinking is nurtured by a long series of positive narratives and facts about foreign investment. FDI has been one of the pillars of international development efforts for over 70 years. Its promise has not been limited to critical finance, but extends to longer term competitiveness through access to better technology, managerial know-how and, above all, prosperity through more and better paid jobs in the formal sector. From the old prescriptions of the so-called Washington Consensus to the hopeful Addis Ababa Action Agenda, the dominant development narrative has therefore favoured a rather indiscriminate pursuit of investment volume. This brief calls for rethinking of narratives and policies that help to improve the impact of FDI, based on secular trends that challenge our expectations. Four such trends stand out: First, while other sources of finance for development have grown considerably over the last decades, foreign invest¬ment has not followed the trend. Second, the kind of investment that is associated with stronger gains and longer term commitment in host economies – greenfield FDI – has also been in consistent decline as a share of total invest¬ment, while mergers and acquisitions and project finance have gained in importance. Third, the top 100 multinational enterprises (MNEs), accounting for nearly a quarter of global FDI stock, rely less on employment today than they used to in order to grow their foreign presence. Job creation, knowledge transfer and spillovers are therefore less likely to materialise through the presence of mega-firms and their corresponding investment at scale. Fourth, the growth of Chinese outward FDI within a strategic expan¬sionary political agenda stands to change rules and attitudes towards foreign investment moving forwards. We argue that, collectively, these trends invite a renewed conversation around the kind of foreign investment we want and expectations of this source of finance for develop¬ment. These facts obscure neither the broad benefits of FDI to developing countries, nor the value proposition of FDI attraction. Rather, they raise questions about expectations, priorities and the alignment of investment policy with the realities experienced across develop¬ing countries. To that end, we propose four priorities that stand to make a difference in the current context. We call for policy-makers to: 1) Place additional emphasis on retention of investment and linkages with the domestic economy. 2) Try new approaches for FDI attraction that focus on improving domestic investment facilitation frameworks. 3) Be selective as to investment sources and activities in order to mitigate political risks and align inward investment better with sustainable development. 4) Add evidence to improve our understanding of invest¬ment and inform decision-making. Overall, it is critical to engage in a serious multi-stakeholder conversation around expectations, actors and solutions that respond to the investment reality of today.
Topic:
Development, United Nations, Foreign Direct Investment, and Economy
Political Geography:
Global Focus

50. Vietnam’s Global Value Chains Participation and Policy Implications for South Korea-Vietnam Economic Cooperation

Author:
Quang Hoan Truong
Publication Date:
09-2022
Content Type:
Policy Brief
Institution:
Korea Institute for International Economic Policy (KIEP)
Abstract:
The term “value chain” refers to the whole production process of a good or service from the design and raw material processing to manufacturing and market services for the final customers. A global value chain (GVC) indicates production across multiple countries (Simola 2021). Wang et al. (2017) distinguish between simple and complex GVC activities and classify GVC participation in the following four activities: (i) export its domestic value added in intermediate exports used by a direct importing country to produce products for the importing country’s final consumption (simple GVC); (ii) export its domestic value added in intermediate exports used by a direct importing country to produce products for importing countries’ exports to third countries (complex GVC forward participation); (iii) importing foreign value added in intermediate imports to produce products for domestic use (simple GVC); (iv) importing foreign value-added in intermediate imports to produce products for its gross exports (complex GVC backward participation). Trade and foreign direct investment (FDI) are considered to be the main driving factors of Vietnam’s economic growth. However, Vietnam’s growth rates became substantially lower in the first decade of the 21st century and even lower after 2008, putting the country in high danger of falling into a middle-income trap (Nguyen and Truong 2022). Overcoming this huge challenge will require Vietnam to make greater progress in GVC participation, which can only be obtained by implementing the appropriate policy reforms and adjustments, particularly in FDI, trade, and industrial and institutional areas. In this regard, assistance and cooperation from Korea – an advanced economy, especially a top trade and FDI partner of Vietnam – would play a significant role in improving Vietnam’s GVCs participation. Against this backdrop, this study aims to examine Vietnam’s GVC participation. It then assesses the major challenges faced by Vietnam’s GVC participation. Based on this, the research draws relevant policy implications for Vietnam–South Korea (hereafter Korea) economic cooperation to improve Vietnam’s GVC participation in the following years.
Topic:
Foreign Direct Investment, Trade, Economic Cooperation, and Global Value Chains
Political Geography:
Vietnam and Southeast Asia