توسعه انسانی و سرمایه گذاری مستقیم خارجی در کشورهای در حال توسعه: تأثیر سیاست سرمایه گذاری مستقیم خارجی و فساد اداری

While policymakers place great importance on foreign direct investment (FDI) in advancing development in developing countries, the links between FDI, economic development, and human development remain tenuous. We attempt to better understand these relationships by looking at the influence of FDI policy and corruption on these relationships. We find that FDI inflows are more strongly positively related to improvement in human development when FDI policy restricts foreign investors from entering some economic sectors and when it discriminates against foreign investors relative to domestic investors. The relationship between FDI and improvement in human development is also more strongly positive when corruption is low.

In recent years, developing countries have increasingly relied on private capital as a source of funding. Since the early 1990s, private sources of funding have made up over 75% of their external capital flows. The major contributing group to this private capital has consistently been foreign direct investment (FDI), with its share going from less than 30% in the early 1990s to nearly two-thirds of the total by 1998 (UNCTAD, 2003). While there was a decrease in FDI in the first few years of the 21st century, 2004 started a new trend in accelerated growth, with 2007 having the highest level of FDI ever recorded (UNCTAD, 2008). Thus, it is important that we understand the effect FDI has on developing countries. Policymakers strongly believe that FDI is an important element of economic development in developing countries. In the final report of the 2002 United Nations-hosted conference on development, the following was stated: Foreign direct investment contributes toward financing sustained economic growth over the long term. It is especially important for its potential to transfer knowledge and technology, create jobs, boost overall productivity, enhance competitiveness and entrepreneurship, and ultimately eradicate poverty through economic growth and development (United Nations, 2002, p. 5). Beginning in the mid-1980s, many countries in the world started on a path to liberalize their FDI policies, and from 1993 to 2003, 94% of the 1,718 regulatory changes made by countries around the world were favorable to FDI (UNCTAD, 2006). Developing countries, in particular, have created an environment that is increasingly more amenable to foreign investors (UNCTAD, 1999 and UNCTAD, 1999). Government policy changes have made it easier for foreign investors to enter more economic sectors and establish operations. Many restrictions on foreign equity participation and ownership have been removed. Screening and authorization of the establishment of foreign-owned enterprises have been replaced by simple registration in some sectors, and many performance requirements have been lifted in favor of incentives. But the belief that indiscriminate entry of FDI will improve a country’s economic development continues to be questioned by the empirical evidence. The conclusion reached after a vast number of empirical studies on the relationship between FDI and economic development is that we still do not understand the role of FDI in economic development. The relationships between FDI and factors that promote economic development, such as industry structure and performance (Agosin and Machado, 2005, Aitken and Harrison, 1999, Blomström and Kokko, 1996, Blomström et al., 1994, Blomström and Wolff, 1994, Haddad and Harrison, 1993, OECD, 2002, Smarzynska, 2002 and UNCTAD, 2000), technological spillovers (Aitken and Harrison, 1999, Álvarez and Molero, 2005, Blomström, 1986, Blomström and Sjöholm, 1999, Borensztein et al., 1998, Bwayla, 2006, Haddad and Harrison, 1993, Konings, 2001, Lall, 1980 and Smarzynska, 2002), and human capital development (Elmslie and Milberg, 1996, Feenstra and Hanson, 1997, Jessup, 1999, Kucera, 2002, Levinsohn, 1996, OECD, 2002, Oman, 1999 and Slaughter, 2001), have been analyzed. In nearly all relationships, the results vary widely; some studies show a positive relationship, others a negative relationship, and still others show no relationship at all. Even with regard to the relationship between FDI and economic growth (Balasubramanyam et al., 1996, Borensztein et al., 1998, Carkovic and Levine, 2005, JBIC, 2002, World Bank, 2002 and Zhang, 2001), one that, some argue, should be the most unambiguous, the results are mixed. Furthermore, studies that do show a positive correlation between FDI and GNP still say nothing of causation (Caves, 1996). Several reasons have been suggested as to why we continue to receive such mixed results. Some argue that our empirical methods have been inadequate (Gorg & Strobl, 2001), which has provided an impetus in recent years for the use of more panel studies rather than the previously often used cross-sectional study. While panel studies have allowed us to control for time-invariant differences and have increased our understanding of temporal relationships, both of which are important in this research question, it has not eliminated the variance in results (Görg & Greenaway, 2004). Similarly, Lipsey and Sjöholm (2005) look at a host of studies that investigated wage and productivity spillovers and conclude that methodological differences do not determine variance. Others contend that this lack of consensus among the studies is due to the disregard of several factors that are essential for understanding the role of FDI in development, such as country characteristics and policies (Blomström & Kokko, 1996), which are not part of the model in the many studies that focused on a single industry in a single country. Additionally, the level of corruption can also influence the benefits that are accrued from FDI (Bitzenes et al., 2009 and Blackburn and Sarmah, 2008). Blackburn and Sarmah (2008) found that corruption is negatively associated with FDI inflow and economic development. Country and industry differences are so important that Lipsey and Sjöholm (2005) suggest that maybe there are no universal relationships. An additional issue with the current research stream is that the focus has been on understanding the relationship between FDI and economic development, which, some argue, is an overly narrow view of development. The purpose of development, broadly speaking, is to enhance people’s lives and to allow for individuals to achieve their legitimate aims in life (Rawls, 1971 and Sen, 1999). It means that individuals must have access to those things that are required to achieve these aims, such as liberties, health, education, and economic means. While it is often assumed that economic growth leads to this broader notion of development, there is evidence to the contrary (Sen, 1999 and Stiglitz, 2006). Infant mortality in Jamaica, for example, is nearly half that in Brazil, despite Jamaica’s per capita income being nearly half of Brazil’s. Life expectancy in Cuba is 77 years with a per capita income of $5,259, but only 49 years in South Africa, which has a per capita income of $12,650 (UNDP, 2004). Even in the current economic downturn, the United States shows signs of recovery when looking at economic factors such as GDP; yet, joblessness continues to increase and is forecasted to be high for some time. Thus, economic growth does not provide the full picture of human development; country characteristics and policies are also determinants of the level of human development. We have seen many indications particularly since the strong push for free markets and trade liberalization in the 1990s that markets alone do not provide the full answer to development. Stiglitz (2006) argues that government plays a major role in determining the pace of human development and that development requires getting the right balance between markets and the government. Additionally, successful development requires that governments are motivated to work toward this end. Oftentimes, particularly in developing countries, the government does not have the interest of the people in mind. In light of the critical role policymakers have given to FDI in advancing development in developing countries as well as the tenuous linkages between FDI and economic development and between economic development and human development, this study explores the interaction between FDI, FDI policy, level of corruption, and their effects on human development. We first discuss arguments for both positive and negative effects FDI might have on economic development. We then explore how FDI policy may affect this outcome. Finally, we look at the influence FDI policy has on the relationship between FDI and human development. We argue that FDI inward flows are more positively related to human development when FDI policy strategically controls foreign investment by limiting the economic sectors open to foreign investment or by discriminating against foreign investors in favor of domestic ones. Additionally, we argue that corruption reduces the positive effect of this relationship. We test our hypotheses by looking at a sample of 49 countries over a 26-year time period (1980–2005) using a panel study. We find that FDI inward flows are more strongly positively related to human development when FDI policies are such that they restrict foreign investment from entering some economic sectors and when they discriminate against foreign investors in favor of domestic ones. The relationship between FDI inward flows and human development is also more strongly positive when corruption is low. Finally, we discuss the implications of our findings for firms and policymakers.

The effect of FDI on economic growth in developing countries is an important question and has been widely studied. While policymakers strongly believe that FDI is an important element in economic growth, past empirical studies are divided on how important FDI really is. It has been argued that this lack of consensus is partly due to inadequate methodologies, which has shifted the field to use panel studies, a model that can more adequately address this research question. A second explanation for the variance in results is a disregard for country characteristics and policies. Additionally, there is an increasing skepticism of the linkage between economic development and a broader notion of development, one in which humans can flourish (Sen, 1999 and Stiglitz, 2006). Past studies looking at the relationship between FDI and development have focused primarily on economic factors, with the assumption that economic growth will lead to human development. But there is evidence that such an assumption is not valid. Our study tries to address each of these issues by using a panel study to look at the interaction between FDI and FDI policy and the effect it has on human development. The two types of policies we investigate are economic sector restrictions and discrimination. Additionally, we look at the interaction between FDI and corruption and its effect on human development. In this paper, we suggest that while FDI may promote economic growth in developing countries, it is not a certainty. If brought in strategically, FDI can contribute to a country’s development directly by providing capital and jobs, and indirectly through technology spillovers. If left to its own devices, however, FDI may increase industry concentration, drive out domestic firms, and not pass on advanced techniques and technologies to domestic investors. Foreign investors’ primary interest is profit and not national development. Thus, it is more likely that FDI will promote human development only when FDI policy ensures that FDI aligns with and promotes development. Accordingly, policies that restrict foreign investors to sectors of the economy where foreign expertise is needed and that, when possible, favor domestic investors over foreign ones so that a strong local economy can be established, we hypothesize, will more likely ensure that FDI contributes to improvements in human development. Additionally, corrupt governments can block human development improvements that might arise from FDI, and, thus, we hypothesize that high levels of corruption will negatively influence the positive effect that FDI can have on human development. We find that when countries have policies that restrict foreign investors from entering some sectors, FDI has a more positive influence on improvement in human development. This suggests that, possibly, foreign investment’s contribution to development is enhanced when it is restricted to those sectors where foreign expertise is needed to promote development. Additionally, we found that FDI inflow decreased year-to-year improvement in HDI when there were not discriminatory policies in place. Similar results were found when considering the effect on improvement in life expectancy. A possible explanation of this result is that when domestic investors are given preferential treatment over foreign investors, it may be the temporary boost needed to grow and compete, leading to more sustainable and organic growth and development. Finally, we found that FDI inflow decreased improvement in HDI when corruption was high. This result is strengthened by similar results when looking at the effect on improvement in life expectancy and adult literacy. This suggests that corruption obstructs the benefits of FDI from reaching the population. While these results are tentative, they do suggest that when constraints are put on foreign investors, a country is more likely to see improvements in human development. When foreign investors are allowed free access, the effect it has on human development depends on the whether or not foreign investors’ objectives align with those that will promote human development, which would be merely fortuitous. Clearly, this is all dependent on whether the country elite, those that are making or influencing policy, are committed to human development, and, thus, corruption is an issue. Restricting economic sectors from FDI and discriminating against foreign investors may reduce the volume of FDI, but this study implies that the trade-off of less FDI for FDI that is strategically used is more beneficial to human development in the long run. Part of the reason for this may be that foreign investors’ primary objective is profit and not development and, thus, it may be working at cross-purposes to development. Moreover, it seems that what is important for development is that those in the host country are motivated to learn from foreign investors but are still able to participate. Domestic investors need to be able to take advantage of spillovers, which may require the existence of FDI but not direct competition with FDI. As one is learning and getting up to speed, the constraints on FDI allow for some protection from the most advanced competitors, similar to protection of infant industries. For the general host population to develop, what is helpful may be an overall environment that displays excellence and provides a benchmark to which one can aspire. It is not that one needs to compete or interact with excellence to more clearly understand what excellence is and what is required to achieve it. Through an environment that contains excellence, the population in the host country aspires to learn and develop capabilities. This creates an encouraging environment where aspirations are built rather than a ruthless one where hope is lost. Nevertheless, there are limitations as to what can be concluded from this study. We look at two policy conditions with a rather obtuse measure, and while they provide us with some initial findings, more detailed studies could further our understanding. The high level measure of simply the existence of restricted sectors or the existence of discrimination does not capture the intricacies of what may be happening. Whereas we treat any policies of restriction and discrimination equally in our study, the impact of some may be more severe than others. It also assumes that policymakers are correctly restraining foreign investors and using FDI in areas that make sense for development. Our study does not make any judgments as to whether this is in fact the case. An understanding of the existing capabilities and how compatible they are with restricted sectors or areas of discrimination would be an area for further research. Thus, additional studies that refine the types of restricted sectors or discrimination are needed. While the results of this study provide a preliminary understanding of the influence of FDI policy on FDI and its effect on human development, further studies are needed to parse out in more detail the influence of FDI policies.