حاکمیت، سرمایه گذاری خصوصی و سرمایه گذاری مستقیم خارجی در کشورهای در حال توسعه

This paper uses annual aggregate data for 46 developing countries covering the period 1996–2009 to investigate if FDI crowds out domestic private investment and if alternative elements of governance have differing effects on the relationship between FDI and private investment. Results suggest that total investment (FDI and private) is greater in countries with good governance, there is evidence of crowding out (FDI displaces domestic private investment), and the extent of crowding out is related to governance. Corruption and political instability are the governance indicators that appear to have the greatest impact on investment. Political stability is found to be the most important aspect of governance in terms of the relationship between FDI and domestic private investment: an increase in FDI has the greatest effect on reducing private investment (but increasing total investment) in politically stable regimes.

It is generally recognized that investment is important for growth and that governance affects investment; good governance is associated with higher investment (both FDI and private domestic). Less attention has been paid to whether particular aspects of governance have different effects on specific types of investment, and on the relationship between sources of investment. This paper investigates the relationship between foreign direct investment (FDI) and private investment in a sample of 46 developing countries for 1996–2009, and in particular how this relationship may be affected by governance (distinguishing alternative measures of governance). Alternative sources of investment finance can have different effects on total investment depending on how they relate to each other and how each responds to country characteristics, governance in our case. Using the Kaufmann, Kraay, and Mastruzzi (2010) data allows us to distinguish different elements or indicators of governance, but restricts the coverage to the period since 1996. The recent period is appropriate as there was a global increase in FDI from the mid-1990s and many countries implemented economic liberalization in the early 1990s that attracted FDI; Agosin and Machado (2007) report that the major increase in their ‘‘openness to FDI” index was during 1990–96, with only small changes after 1996. These global and policy influences on FDI are unlikely to confound inferences from a sample for the period 1996–2009. A specific concern is whether FDI crowds in (adds to) or displaces (crowds out) domestic private investment. Although this is an important issue, there are surprisingly few empirical studies of the impact of FDI on domestic investment in developing countries (Nunnenkamp, 2004). If FDI crowds out domestic investment, total private investment rises by less than the FDI and the benefits for the country are reduced; Mišun and Tomšík (2002) find evidence for crowding-out in Poland in the 1990s. If FDI crowds in (stimulates) private investment, total investment increases by more than the FDI and the benefits are enhanced; Mišun and Tomšík (2002) for Hungary and the Czech Republic in the 1990s, and Kim and Seo (2003) for South Korea in 1985–99 find evidence of crowding in. Agosin and Machado (2005) find that FDI has no significant effect on domestic private investment for countries in Africa, Asia, and Latin America over 1971–2000, although there seems to be crowding out in Latin America in some sub-periods. The evidence on the relationship between FDI and domestic investment is mixed. However, none of these studies consider if governance is relevant to the relationship. There is a large literature on determinants of FDI that does include governance indicators but their significance is contested. Blonigen and Piger (2011) conduct a meta analysis of studies of determinants of FDI and find that a number of variables commonly included in the literature are not robust, including host country institutions. However, for particular (groups of) countries host factors may be important (Gastanaga, Nugent, & Pashamova, 1998). Lipsey and Sjöholm (2010) argue that the weak business environment and inefficient institutions relative to other destinations in East Asia account in part for low inflows of FDI to Indonesia. It may also be the case that host country factors matter more for certain types of FDI; Lederman, Mengistae, and Xu (2010) find that foreign manufacturing firms are more likely to locate in better governed Southern African countries. Asiedu and Lien (2011), for 112 developing countries over 1982–2007, find that in countries with a relatively low share of minerals and oil in total exports democracy enhances FDI whereas democracy reduces FDI in countries with high natural resource shares in exports. Specific aspects of the political regime may be important. Busse and Hefeker (2007) find that government stability attracts FDI while Guerin and Manzocchi (2009) find that parliamentary democracies are more likely to attract FDI than presidential ones. However, this literature does not address the link between FDI and domestic investment, hence the impact on total investment. We consider a specific hypothesis that the relative importance of alternative sources of financing for private investment, and how they interact, may be influenced by the quality of governance as an indicator of how capital (investment) friendly the political regime is (the notion is clarified further in the next section, but our primary concern is with the stability of the regime). Existing studies of FDI and private investment interactions either do not include governance variables or do not consider that governance may affect the relationship. Political uncertainty and poor governance (such as weak property rights, high corruption, or excessive regulation) have been found to discourage domestic private investment and FDI (Campos et al., 1999 and Mauro, 1995). This paper considers whether, in addition, the relationship between FDI and private investment is affected by the nature of the political regime. We characterize regimes with high (good) values of governance indicators as capital-friendly or favorable to investment, while regimes with low values of governance are capital-unfriendly or unfavorable to investment. The paper is structured as follows. Section 2 outlines a theoretical link between political regime and the source of private investment that motivates our empirical analysis. Section 3 sets out our empirical specification and choice of variables. Section 4 presents the results of the analysis of the relationship between private investment and FDI under different governance indicators using dynamic panel methods with annual data for 46 low or middle income countries over 1996–2009. Section 5 provides conclusions and discusses implications for financing private investment.

The paper investigates the effect of FDI on domestic private investment allowing for different governance indicators over the period 1995–2009 for 46 developing countries. Some consistent findings emerge. First, total private investment (PV and FDI) is higher under favorable regimes (those with governance scores above the percentile mean), supporting our first hypothesis. This confirms a result often found in the literature and need not be discussed further. Although Blonigen and Piger (2011) argue that the evidence that democracy or good governance attracts FDI may not be robust, it is likely that for particular countries governance factors may be important, at least at the margin, i.e., as other countries are alternative locations, depending on the type of FDI, certain features of governance may affect investment decisions. Our results support this even if the difference is not significant for some governance indicators, which may be because we make a simple comparison of PV and FDI in high (above the mean) and low (below the mean) countries (and low governance countries tend to be under-represented in the sample). Second, FDI appears to crowd out domestic private investment, implying that total investment increases by less than the FDI as other private investment is reduced, and this effect is related to governance. The crowding out effect is greater in countries with better governance, except where governance is measured by political stability. An interpretation is that poor governance discourages FDI hence domestic private investment must be higher to compensate (this may be through foreign borrowing). As governance improves, FDI is attracted and displaces some private investment opportunities so total investment does not increase by the amount of FDI and the effect on growth is constrained; this may be one reason why Alguacil, Cuadros, and Orts (2011) find that policies designed to attract FDI are not sufficient to ensure economic growth. A plausible explanation for why this effect is more pronounced in high governance countries is because levels of investment (private and FDI) are greater under high governance, competition for profitable opportunities is greater and, at the margin, foreign investors command the better opportunities. Foreign firms have easier access to finance and a productivity advantage over domestic firms so may be willing to pay higher prices for capital goods (and labor), which discourages investment by domestic firms (Driffield & Hughes, 2003). This poses a dilemma for governments who strive to improve governance to attract FDI to promote growth (Nunnenkamp, 2004) as crowding out reduces the growth effect. The results suggest that governments could target certain aspects of governance; increased FDI under political stability and low corruption has the greatest impact on increasing total private investment. Third, political stability affects the FDI-private investment relationship in a different way than other governance indicators. Specifically, political stability seems to attract the highest levels of FDI with the greatest impact on total investment, although also the greatest crowding out effect. In unstable regimes the crowding-out effect of FDI is large and the impact on total investment is small compared to regimes with low values of other governance indicators. This offers limited support to the second hypothesis that FDI is a relatively more important source of investment finance in unstable as compared to stable regimes. Private investors are deterred by instability as they fear losing control over (or profits from) their investment if the regime changes; comparable opportunities in more stable countries would be more attractive. Private investment in unstable regimes is likely to be concentrated in specific assets not available elsewhere, such as natural resources, and FDI may be relatively important in these sectors. Furthermore, foreign investors in extractive industries are often required to share ownership with the government (Asiedu & Esfahani, 2001) or in joint ventures. In this sense it is the stability of the regime that may be most important to the relationship between FDI and domestic investment. As the regime becomes more stable other investment opportunities become attractive and although FDI may crowd out domestic investors total investment increases significantly. This would be an issue worth exploring in future research based on case studies of countries with a history of regime change and populist regimes to identify effects on sources of investment finance. The finding that FDI crowds out domestic private investment does not imply that FDI is not beneficial (but may help explain why finding aggregate benefits is often elusive); it may simply reflect the fact that profitable investment opportunities are limited. It may be unreasonable to expect FDI and private investment to increase together. Foreign investors, especially multinational firms, have advantages over domestic investors; typically, they have greater access to investment finance, technology and global markets. In any country, foreign investors will be in a stronger position to capture the best investment opportunities. In low income countries with poor governance, domestic investors have an incentive to seek foreign partners; joint ventures may be a good option but equity shares would provide financing (and note that a share above 10% is treated as FDI). As an economy grows and the quality of governance and institutions improves, it will be more attractive to foreign investors, and the need or incentive for domestic investors to seek foreign partners is lessened. In such an environment, to minimize adverse effects of crowding out the most important policy is to ensure opportunities for domestic investors to enable them to compete effectively for the best investment opportunities. This implies that investment incentives should not discriminate against domestic investors, and that providing access to domestic financing is more important for domestic investors.