Is the Relocation of Polluting Industries Prompted by FDI Flow and Stock, Globalisation, Corruption and Regulation?

Abstract

Can globalisation and foreign direct investment shape sustainable development? Foreign direct investment is one of the main drivers for the transfer of polluting industries. With this in mind, the main objective of this research is to identify the role played by foreign direct investment (flow and stock), globalisation (de jure and de facto), corruption and regulatory quality in environmental degradation and sustainable development. To accomplish this objective, and to link the relationships under analysis to the level of development, a comparison between a group of developing countries and a group of developed ones was performed. The results confirm the suitability of the division of the countries by revealing various effects. This analysis was conducted from 1996 to 2017 and by recurring to the Autoregressive Distributed Lag model. This study proves that foreign investors play a vital role in reaching sustainable development. Measures must be implemented to eliminate the distortions that cause a company based in a country with strict environmental regulations to relocate its production to one with lax environmental regulations. However, these measures need to be combined with complementary measures that encourage developing economies to agree to a possible slowdown in their economic growth if sufficiently compensated for this reduced growth.

The Impact of FDI on Urban PM2.5 Pollution in China: The Mediating Effect of Industrial Structure Transformation

“…If there is no transfer of polluting industries, and the original economic industrial structure is maintained, the larger economic scale leads to more resource input and consumption. Leal et al (2021) argues that in the developing economies, the stock of FDI increases sustainable development through inward FDI, however, it increases environmental degradation as well [80]. This view is similar to that of Tang et al (2016) [85].…”

“…This shows that the introduction of FDI is not conducive to alleviation of PM 2.5 pollution in Chinese cities, and the PHH is therefore applicable in China. Leal et al argue that it is predictable in the developing economies, due to certain evident factors, such as comparative advantages on labor factor or energy [80].…”

A Critical Study on the State of Globalization Today, Focusing on Selected Current Global Issues

“…Since the world needs to cooperate and do consensus. However, if there is a discussion regarding fulfilling interest, each country has its own special needs, and this makes it uneasy to be "just" in globalisation (Leal, Caetano and Marques, 2021). One of the globalisation purposes is to help increase the opportunity for enterprises to optimise their core competency, which is the main strength of the company's operations.…”

“…Globalisation is driving the economy to practice large-scale and quantity production, and global circulations of items. These are contrasting to resources and energy conservation or limiting greenhouse gasses (Leal et. al., 2021).…”

“…Governments from developed nations may need to impose laws and force the MNCs to assist the developing countries rather than exploiting. Polluting industries from developed nations transfer the emission from the home countries that do not allow them to contaminate the environment through their production, on to the developing nations with lower quality on the regulation, or in countries where the MNCs may easily bribe corrupt governments to allow them to keep operating with non-sustainable methods (Leal et. al., 2021).…”