Trends and Determinants of Foreign Direct Investment in South Asia
Like many other developing countries, South Asian nations have been experiencing increased Foreign Direct Investment (FDI) inflows over the past decade as developing countries get a larger share of cross-border investments once sent to developed co...
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| Language: | English en_US |
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Washington, DC
2014
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| Online Access: | http://documents.worldbank.org/curated/en/2013/06/17939544/trends-determinants-foreign-direct-investment-south-asia http://hdl.handle.net/10986/16522 |
| Summary: | Like many other developing countries,
South Asian nations have been experiencing increased Foreign
Direct Investment (FDI) inflows over the past decade as
developing countries get a larger share of cross-border
investments once sent to developed countries. Nonetheless,
South Asia's FDI inflows remain the lowest relative to
Gross Domestic Product (GDP) among developing country
regions. Over the next 20 years, more than one million new
workers will be entering the South Asian labor market each
month as the region's youth bulge matures and seeks
employment. To absorb these workers and provide higher
living standards and reduce poverty, South Asian countries
will have to rely on more than just public investment. This
report looks into the historical patterns of FDI in South
Asia, examines its sectoral composition, and evaluates
current policies and policy options that may help create an
environment for increasing FDI flows. The launching point
for this study is the substantial empirical literature that
suggests that FDI is associated with growth, development,
and productivity enhancement. The goal of the study is
modest in that it does not seek to estimate the size of FDI
spillovers on productivity growth, or address whether
governments should actively subsidize FDI inflows over
domestic investment as a means to enhance growth, but rather
to understand whether the level of FDI flows as a share of
GDP, its sectoral composition, and intra-regional flows are
comparable to other developing regions and, if not, what
might be some of the impediments to these flows. While FDI
flows have increased over the past decade to South Asia,
particularly from developed countries to South Asian service
sectors, it has lagged in other sectors and remains
relatively low overall. Overall, positive changes have taken
place over the past few decades, while restrictions on FDI
differ substantially among countries in South Asia.
India's progress on FDI promoting policies has
accelerated in recent years to make FDI policies more
transparent, predictable, and simpler. Many other countries
have also taken steps to improve transparency in regulations
and reassure investors about the security of their
investments in the country. Finally, the paper examines the
determinants of FDI growth in South Asia. |
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