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Impact of foreign direct investment on socio-economic development in belt and road countries

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  • Abdul Sattar
  • Abida Hassan
  • Muhammad Noshab Hussain
  • Uzma Sakhi
  • Ali Raza Elahi

Abstract

This study is an attempt to empirically investigate the impact of foreign direct investment (FDI) on socio-economic development in the “Belt & Road” initiative (BRI) countries. It employed panel data for the period 2005 to 2018. This study used three socio-economic development indicators, life expectancy, GNI per capita, and human capital development, as outcome variables. This study found a long-run association between FDI and socio-economic development. The baseline regression results indicate that FDI does not contribute to socio-economic development in BRI countries and these findings are robust with Fully Modified Ordinary Least Square (FMOLS). However, when taking into account the region-wise analysis it is found that FDI has a positive and significant impact on poverty reduction in South Asia (SA) and Central and Western Asia (CWA) region and a negative impact in Central and East Europe (CEU) and Middle East North Africa (MENA) and it has no effect on poverty reduction in Sub-Sahara Africa (SSA) and East Asia Pacific (EAP) region. FDI has a positive effect on improved health facilities in SA and CWA region and it has a statistically insignificant or negative impact in the rest of the region. Finally, there is a positive and significant impact of FDI on human capital development in CEU and EAP region and negative association in MENA, however, it has no role in SA, CWA and SSA region. This finding postulates an idea that foreign direct investment is not a black and white mechanism. It is recommended that governments of BRI countries must prioritize public health facilities, social safety programs, poverty reduction initiatives, and human capital development strategies when looking for foreign direct investment in the country.

Suggested Citation

  • Abdul Sattar & Abida Hassan & Muhammad Noshab Hussain & Uzma Sakhi & Ali Raza Elahi, 2022. "Impact of foreign direct investment on socio-economic development in belt and road countries," Cogent Economics & Finance, Taylor & Francis Journals, vol. 10(1), pages 2143772-214, December.
    • Handle: RePEc:taf:oaefxx:v:10:y:2022:i:1:p:2143772
    DOI: 10.1080/23322039.2022.2143772
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    Cited by:

    1. Zaman, Khalid, 2023. "Navigating the Perils of a Banana Republic: Lessons from Pakistan's Economic Crisis," MPRA Paper 116713, University Library of Munich, Germany, revised 08 Mar 2023.

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