The impact of foreign direct investment on economic growth of Nepal (Влияние прямых иностранных инвестиций на экономический рост Непала) тема диссертации и автореферата по ВАК РФ 08.00.14, кандидат наук Мишра Шила

• Мишра Шила
• кандидат наук
• 2020

Оглавление диссертации кандидат наук Мишра Шила

TABLE OF CONTENTS

INTRODUCTION

CHAPTR 1. THE THEORETICAL ASPECTS OF FOREIGN DIRECT INVESTMENT IN LEAST DEVELOPED COUNTRIES

1.1 Theory of foreign direct investment

1.2 Determinants of foreign direct investment in least developed countries

1.3 Importance of foreign direct investment in least developed countries

CHAPTER 2. Foreign direct investment in Nepal

2.1 Nepal as a recipient of foreign direct investment: trends and patterns

2.2 Investment climate in Nepal

2.3 The attractiveness of Nepalese key industrial sector for investment

CHAPTER 3. POLICY ON ATTRACTING FOREIGN DIRECT INVESTMENT IN NEPAL'S ECONOMY

3.1 Parameters of the effects of FDI on Nepal Economy

3.2 Directions for improving the competitiveness of the economy of Nepal through foreign investment

3.3 Policies to stimulate the flow of foreign investment in economy of Nepal

CONCLUSION

REFERENCES

APPENDIXES

Введение диссертации (часть автореферата) на тему «The impact of foreign direct investment on economic growth of Nepal (Влияние прямых иностранных инвестиций на экономический рост Непала)»

INTRODUCTION

The relevance of the research topic. Foreign direct investment (FDI) in developing countries that belong to the least developed countries, such as Nepal, is considered by united nations conference on trade and development (UNCATAD) a new phenomenon compare to high and middle income economies. FDI inflows to Nepal are extremely low: the average amount in the period 2012-2016 was about 70 million US dollars, which is 0.3% of GDP. The government of Nepal (GON) goal is that this should rise to about 5% of GDP on a sustained basis over the next decade. The reason behind weak FDI inflows and the policy reforms which could be undertaken to augment the flow of FDI is of paramount concern amongst the policymaking bodies of GON.

Most of the related studies found in the literature are on developed and developing countries, and when it comes to the Least Developed Countries (LDCs), it focused mostly in Africa. This study mainly focuses on the impact of FDI in Nepal, one of the LDCs in Asia. FDI has a beneficial effect on economic growth for most of the least developed host countries. FDI can reduce the poverty level of LDCs.

Attracting foreign investment to LDCs is a bit of a challenge because FDI mostly flows to the countries which are economically stable and have enough resources. Least developed countries are financially weak, and at the same time, most of them do not have enough natural resources.

Degree of the development of the topic. Theoretical, practical and methodological aspects of the development of foreign direct investment as a whole are found in the works of many foreign economists and scientist (P. Vernon, J. Dunning, T. Ozawa, S. Hymer, P. Buckley, J. Hennart, A. Rugman, P. Atukoral, and others).

The research of the direct impact of FDI inflows on economic growth in the host country was studied by A. Akinlo, V. Balasubramanyam, E. Borenstein, S. Adams, R. Adhikari, B. Adhikari, A. Benassi-Kere, M. Blomstrom, R. Forte, K. H. Zhang, N. A. Volgina, J. G. Golodova, N. P. Gusakov, E. V. Morozenskaya, E. M. Petrikova, E. Gaida, and others.

Some characteristics of FDI in their works describe E. Asiedu, A. Chakrabarti, S. Estrin, A. Bende-Nabend, S. Wilhelms, R. Tekin, L. Fedyakina, Yu. N. Moseikin, A.V. Kuznetsov, N.N. Liventsev, V.V. Mikheev, G.E. Roshchin, N.N. Kotlyarov,

A.S. Bulatov, V.A. Melyantsev, I.O. Abramova, L. L. Fituni, G.M. Kostyunina, I.

B. Matsenko, and others.

Undoubtedly, the scientific potential formed at present is a theoretical foundation for carrying out analysis of the impact of FDI on economic growth, identifying its distinctive features and characteristics depending on the host countries. Nevertheless, it should be acclaimed that at present, the effect of FDI on economic growth and the determinants of FDI to attract foreign companies in the least developed countries like Nepal have been insufficiently investigated.

This dissertation examines the influence of FDI on the economic growth of the least developed country Nepal of the period of 24 years, 1994 to 2017. To create a matrix of industrial attractiveness for investors, ten years of data is collected from the FY 2007/08 to FY 2016/17. In order to generate policies for stimulating foreign investment in Nepal, the study has examined the determinants of FDI by taking annual time-series data for the years 2004-2016. All the above period is based on the accessibility of data from the sources. Nepal brought multi-party democracy in 1990. Nepal passed to a member of the World Trade Organization (WTO) in the year 2004. At the same time, in some cases, to solve specific research problems, we also took into account data for earlier periods.

The purpose of the dissertation research is to clarify theoretical positions and develop practical recommendations, as well as to expand the methodological approaches needed to improve public policy measures aimed at encouraging foreign investment in the economy of Nepal as a representative of the group of least developed countries.

The goal set the following tasks:

- To analyze the possibility of applying theories of foreign direct investment to the least developed countries;

- To find out the key determinants of FDI into Nepal economy

- To determine the most attractive industries for foreign investors

- To explore the effect of FDI on the economic growth of Nepal

- To provide practical recommendations to enhance foreign investment for the economic growth of Nepal

The object of the research is to attract foreign direct investment in the economy of Nepal as a representative of the group of least developed countries.

The subject of the research is to examine the factors attracting foreign direct investment and the parameters of their impact on the economy of Nepal, including the impact of international financings such as loans and borrowings from multilateral organizations and bilateral donors.

The methodological basis of the research, the author used methods of system analysis, synthesis, logic, deduction, and induction, systematization, generalization, comparison and analogies, statistical processing empirical data, expert-analytical method.

The theoretical basis of the research of the study was applied, and the vital work of economists and scientists devoted to the problems of numerous features of the influence of foreign direct investment and economic growth of nations. The information base was made up of data of normative and legal acts, publications in

specialized scientific publications on the issues under study, and materials on conferences, internet resources.

Information and statistical base of the research was made up of data presented in documents and analytical reviews of Nepalese and international organizations: United Nations Conference on Trade and Development (UNCTAD), Organization for Economic Cooperation and Development (OECD), International Labor Organization (ILO), World Trade Organization (WTO), the World Economic Forum (WEF), the World Bank, the International Monetary Fund (IMF), the Central Intelligence Agency - a guide to countries around the world, as well as official statistical collections of the Government of Nepal, and the Central Bank of Nepal (Nepal Rastra Bank).

The scientific novelty of the dissertation research lies in the fact that as a result of comprehensive studies of the problem of attracting FDI to the least developed countries. In particular, a detailed analysis of the characteristics of attracting FDI to the economy of Nepal, the author identified key factors that increase the country's investment attractiveness and developed practical recommendations, aimed at increasing the flow of foreign investment into the economy of Nepal as a representative of the group of least developed countries.

Provisions for protection. The most significant results of the study are as follows:

1. Refined theoretical approaches to the investment attractiveness of the group of least developed countries. The author substantiates the proposition that FDI has a positive influence on the economic enhancement of most of the least developed countries and reduce their poverty level. However, the least developed countries are characterized by unstable political, legal, and economic conditions, and in some cases, a shortage of natural resources, the problem of attracting foreign investment for them becomes especially tricky. In this regard, concerning the least developed

countries, the author proposes to consider Dunning's classical, eclectic theory in conjunction with the conditions for obtaining funding from international institutions and major donors, which helps to increase the investment attractiveness to the least developed countries.

2. Identified the primary determinant of FDI that is most applicable to attract foreign investors in Nepal is low labor cost and institutional development of social and political betterment of the country (fighting unemployment, reducing illiteracy, improving health care, and others.).

3. A matrix has been drawn up for positioning the investment attractiveness of the economic sectors of Nepal, according to which they are divided into three groups: with high investment attractiveness (healthcare, education, and retail and wholesale), medium investment attractiveness (construction, mining, logistics, and agriculture) and low investment attractiveness or low return (electric power, gas industry) - because of unstable political condition till the year 2015. The result is found by developing the matrix of industrial attractiveness based on industry average growth rate (the composition of GDP and gross value added) of FY 2007/08 to 2016/17.

4. The regression model of economic growth is built and tested on statistical data to determine the impact of net FDI inflows, labor force, the export of goods, and services on the GDP of Nepal. The following results were revealed: if other variables are constant, an additional FDI inflows of 1 million US dollars associates the GDP of Nepal by 4.842 million US dollars, while a 1 thousand people increase in labor force associates the GDP of Nepal by 0.1862 billion US dollars. Similarly, if other variables are constant, an additional 1-billion-dollar export of goods and services associates GDP of Nepal by 0.813 billion US dollars. All these indicators are significant for the forecast of GDP in Nepal. Thus, FDI has a significant effect on the economic increment of Nepal.

5. Practical recommendations on improvement of the state policy on the attraction of foreign investments are offered, the main of which are the following:

- Economic reforms for increasing the volume of international aid, including reduction of unemployment, trade liberalization, infrastructure development, and foreign aid to attract FDI;

- Expansion of opportunities for preferential state lending for industrial enterprises, including through subsidies provided by international organizations;

- Strengthening public institutions in the field of economic management and reducing corruption.

The theoretical significance of the dissertation research is to clarify and summarize the existing theoretical approaches to assessing the impact of FDI on capital inflows and economic expansion in the recipient country (belonging to the group name of least developed countries), by compiling an appropriate thematic review; identifying the main factors for attracting foreign investment; determining the main characteristics for the selection of the most favorable policy of stimulating the development of Nepal's economic growth with the help of FDI.

The practical significance of the dissertation research lies in the possibility of using the recommendations and other research results outlined in work by the authorized state bodies in the process of implementing the policy of strengthening the economic condition of Nepal.

The materials of this dissertation research, its essential provisions, as well as suggestions and conclusions can be used in teaching practice when conducting lectures and practical classes in the following disciplines: World Economy, International Trade, International Business, Regional Economy, and others.

The validity and accuracy of the dissertation research. The results obtained in the course of the study are determined by the analysis and in-depth study of the

scientific works of domestic and foreign scientists, as well as the variety of methods used by the author.

Approbation of research results. The main theoretical and practical provisions of the dissertation research are reflected in reports at university and international scientific and practical conferences and seminars, such as the IV Scientific and Practical Conference of Young Scientists of the Peoples' Friendship University of Russia (Moscow, 2015), V Scientific and Practical Conference of Young scientists of the Peoples' Friendship University of Russia (Moscow, 2016), Scientific-practical conference "The World Economy in the XXI Century: Global Challenges and Development Prospects" (Moscow, 2017). Scientific-practical conference "The World Economy in the XXI Century: Value and Values" (Moscow, 2019).

On the topic of the dissertation, 18 scientific papers were published with a total volume of 8.89 pp., including 6 articles in scientific journals inclosed in the index of peer-reviewed scientific publications of the Higher Attestation Commission of the Ministry of Education and Science of the Russian Federation, and 1 article in the publication indexed by the international database of Scopus and Web of science.

The research area meets the requirements of item 7 "International economic interdependence ensuring the sustainable development of the national and world economy. Strategies of national economic development", item 15 "International flows of loan capital, direct and portfolio investments, the problems of their regulation at the national and supranational levels" and item 23 "Place and role of transnational corporations in the modern world economy, their interaction with national economies of home countries and host countries of their foreign branches." specialty passports 08.00.14 - World economy.

The structure and volume of the dissertation research are determined by the range of problems studied and meet the goals, objectives, object, and subject of

research. The dissertation research consists of an introduction, three chapters, including nine paragraphs, consistently revealing the concept, essence, and features of the studied problems, as well as conclusions and references.

The thesis has 184-pages printed text and contains 12 tables, 15 figures, and 2 appendices.