Rethinking Foreign Direct Investment: Global Perspectives
|From left: AIM professor Ron Mendoza, guest presenter Mr. Swarnim Wagle, ADMU professor Dr. Edsel Beja Jr.,AIM professor Frankie Roman, PEZA Deputy Director-General Mary Harriet Abordo, BSP Director Francisco G. Dakila Jr.|
The AIM Policy Center and the Asian Institute of Management (AIM) Journal of Asian Business recently organized a forum featuring the research of Mr. Swarnim Wagle of the World Bank and Dr. Nadia Doytch of the College of Business, University of New Haven, entitled “Rethinking Foreign Direct Investment: Global Perspectives ”, at the Global Distance Learning Center of AIM in Makati City, last August 15, 2011.
Both use cross-country datasets on FDI which have not yet been empirically examined in earlier literature, and both produced quite novel findings. Mr. Swarnim Wagle started off the forum by presenting his paper, “Investing Across Borders with Heterogeneous Firms: Do FDI-Specific Regulations Matter?”. His study of FDI regulations in more than 80 countries, produced evidence that FDI specific policies and reforms do influence FDI flows on the margin. However, de facto openness or what happens in practice tends to play a bigger role in actual inward FDI compared to de jure policies or what is written by law. The study examines cross-country institutional provisions such as arbitration of disputes and legal procedures to establish foreign subsidiaries.
“Dr. Nadia Doytch’s presentation, “Does the Worldwide Shift of FDI from Manufacturing to Services Accelerate Economic Growth? A GMM Estimation Study”, reveals that the shift in composition of FDI towards services can have a positive or negative effect depending on whether the shift is towards financial or non-financial services FDI, with respect to the profile of the absorbing economy. The co-authored paper recently published in the Journal of International Money and Finance also depicts variations in sectoral growth and spillover effects to other sectors.”
With AIM Professor and Policy Center Executive Director Ronald U. Mendoza moderating, four guest discussants commented on the presentations — Deputy Director-General Mary Harriet Abordo of the Philippine Economic Zone Authority; Dr. Edsel L. Beja Jr., professor at the Ateneo de Manila University; Dr. Francisco G. Dakila Jr., Director of Bangko Sentral ng Pilipinas’ Center for Monetary and Financial Policy; and Dr. Francisco L. Roman Jr., professor at AIM and Executive Director of the RVR Center for Corporate Social Responsibility.
Deputy Director-General Abordo talked about PEZA’s critical considerations in crafting policies for FDI specifically the debate on tax incentives and government revenue generation for better infrastructure. She expounded on their focus to create more jobs from the constant stream of FDI for the Business Process Outsourcing (BPO) industry.
Dr. Beja noted that a country’s openness per se does not bring in investments. He emphasized on the rules of the game (de facto) and quotes Adam Smith that the government should provide the conditions in which the competitive markets will emerge.
Dr. Dakila discussed BSP’s independent studies on determinants of credit rating which also shows evidence that government policy effectiveness and governance do matter. Prof. Roman said that given the nature of FDI, the main concern then for economic planning and policy discussion are the implications on how incentives affect outcome and other beneficial and non-beneficial effects in detail.
Based on the studies and discussions, it can be inferred that de facto openness and spillover effects merit further examination to better promote FDI.
The forum gathered guests from the World Bank, The Asia Foundation, MBC, a private law firm, and the UP School of Economics.
About the AIM Policy Center
The Asian Institute of Management Policy Center (APC) is the public policy think tank of the Asian Institute of Management (AIM). Founded on the tenet that a vibrant business leads to social and economic progress, the APC aims to enhance the overall competitiveness of Asian countries through research and policy studies.
About the AIM Journal of Asian Business
The AIM Journal of Asian Business Editorial Office collaborates with the University of Michigan-Ross School of Business for journal articles on public policy and business strategy as they pertain to Asian business, and as they occur in the context of Asia and the world. The JAB’s goals are to inform the academic, business, and public policy communities of the results of relevant current research; to provide expert analysis of current events and reviews of literature in the field; and to add to the business and public policy literature material suitable for academic, executive, and professional education.