The Effects of Foreign Direct Investment and Economic Absorptive Capabilities on the Economic Growth of the Lao People’s Democratic Republic

The purpose of this paper is to examine the impact of consumer price index, infrastructure, human resources, trade openness, and private credit on the attraction of foreign direct investment (FDI) in Tay Ninh province as well as to emphasize the important role of FDI in economic growth of developing areas. The research data was collected from Tay Ninh Statistical Office with 80 samples of a 20-year period from 2000 to 2019. Also, OLS regression method using Eviews software was employed to analyze the data obtained. The findings revealed that human resources, infrastructure and private credit have a positive and significant impact on FDI attraction in Tay Ninh province, while consumer price index was proven to affect FDI attraction negatively. Accordingly, competent authorities of Tay Ninh province should focus on stabilizing prices as well as implementing policies for developing local human resources and attracting high-quality personnel from foreign countries. Tay Ninh province also needs to pay more attention to information technology investment for synchronous development of infrastructure. Moreover, the State Bank of Tay Ninh branch needs to consider more credit sources to provide support packages for businesses, creating a strong basis for establishments to attract FDI for the province's economic development.

Section: Previous Studiessupporting

confidence: 79%

Section: Trade Openness (Trade)mentioning

confidence: 97%

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Factors Affecting Foreign Direct Investment: Evidence on Tay Ninh Province

Tran¹,

Dang²,

Tran³

2020

“…First, FDI helps improve institutional quality (Larrain & Tavares, 2004;Kwok & Tadesse, 2006;Dang, 2013;Long, Ngoc, & My, 2018), and better institutional quality, in turn, reduces shadow economy (Johnson et al, 1998;Friedman et al, 2000;Fugazza & Jacques, 2003;Torgler & Schneider, 2009;Dreher et al, 2009;Dreher & Schneider, 2010;Razmi et al, 2013). Second, FDI has a positive effect on the growth of the formal economy (Romer, 1994;Choe, 2003;Li & Liu, 2005;Long et al, 2018;Mustafa, 2019;Nantharath & Kang, 2019), so that it reduces the size of the shadow economy (La Porta & Shleifer, 2014;Williams, 2008). Third, FDI creates employment (Lall, 1995;Blomström, Fors, & Lipsey, 1997), raises wages (Heyman, Sjholm, & Tingvall, 2007), and improves labor productivity (Le, Duy, & Ngoc, 2019), thus reducing the size of the shadow economy (Boeri & Garibaldi, 2002;Dell'Anno & Solomon, 2008).…”

Section: The Relationship Between Fdi and The Shadow Economymentioning

confidence: 99%

Effects of Foreign Direct Investment and Quality of Informal Institution on the Size of the Shadow Economy: Application to Vietnam

Ngọc¹

2020

Tax is the main revenue of Government, so fighting tax evasion and sustainable growth have been the primary macroeconomic goals being pursued by every developing country, Vietnam included. The existence and development of the shadow economic sector are synonymous with the national budget losing out. In Vietnam, foreign direct investment projects do not promote economic growth and is also a sector that gives way to tax evasion.The purpose of this study is to investigate the impact of foreign direct investment, the quality of the informal institution on the size of the shadow economy in Vietnam, during the period 1991-2015. By applying the Autoregressive Distributed Lag approach and Toda and Yamamoto test, we found evidence to conclude that the quality of the informal institution harms the size of the shadow economy. The results of the causality test show that there is a unidirectional causality running from the shadow economy and the quality of the informal institution to foreign direct investment attraction in Vietnam. Political solutions need to be implemented carefully to counter the harmful effects of the shadow economy. Policymakers should adopt several economic policies to improve the 'human capital' and drive the shadow economy into the formal economy.

“…In several studies, interest rate and inflation are consistently used as proxies of the amount of profit and the level of risk. Meanwhile, for foreign investors, in addition to interest and inflation, changes in exchange rates are also a factor for calculating risk, while the economic growth of a country is also considered a potential gain (Nantharath and Kang, 2019). Changes in exchange rates (depreciation and appreciation) will affect the amount of investment in an investment area (Qamruzzaman et al, 2020).…”

Section: Literature Reviewmentioning

confidence: 99%

On Capital Flight from the ASEAN-8 Countries: A Panel Data Estimation

Istikomah¹,

Suhendra²,

Anwar³

2020

This paper examines how macroeconomic variables, such as interest rate differences, inflation, exchange rates, economic growth and external debt growth, affect capital flight in the ASEAN-8 countries. We apply a panel data model with fixed effect estimation for the data for eight countries from the period 1994 to 2018. We use the residual approach used by the World Bank to measure the value of capital flight. The results show that the interest rate differences, exchange rates, economic growth and foreign debt growth had a positive and significant effect on outward capital flight. A further implication of this finding is that the interest rate differences, exchange rate, economic growth and foreign debt growth are factors that trigger an increase in capital outflow in the ASEAN-8 countries. Nonetheless, inflation rate is not considered to be the main factor influencing capital flight, as average inflation in the ASEAN-8 countries remains relatively stable. This paper will be beneficial for policymakers in the ASEAN-8 countries and encourage them to constantly pay attention to these four variables, as they significantly influence capital flight, whereas they can disregard the impact of the inflation variable that is not significant in influencing capital flight.