Peculiarities of FDI performance in developed, developing and underdeveloped countries/Tiesioginiu uzsienio investiciju veiklos ypatumai issivysciusiose, besivystanciose ir neissivysciusiose salyse.
Tvaronaviciene, Manuela ; Lankauskiene, Toma
1. Introduction
The role of foreign direct investment (FDI) has been a contentious
issue since the inflows of foreign direct investments had increased
rapidly during the late 1980s and the 1990s. Almost every region of the
world is revitalizing the long and contentious debate about the costs
and benefits of FDI inflows (Hansen and Rand 2006). On the one hand,
given appropriate policies and a basic level of development, FDI can
play a key role in the process of creating a better economic environment
(Armbruster 2005; Lee and Tcha 2004). On the other hand, potential
drawbacks do exist, including a deterioration of the balance of
payments, as profits are repatriated having negative impact on
competition in national markets (Tvaronaviciene and Kalasinskaite 2010).
Some countries even eased restrictions on repatriation of dividends by
foreign companies (Tarzi and Shah 2005).
There are many attitudes towards performance of foreign direct
investments and their determinants (Bedell 2005; Head et al. 2005; Hoi
Ki Ho and Tze Yiu Lau 2007; Ismail and Burak 2009; Jackson and Markowski
1996; Robertson 2006; Tvaronaviciene and Grybaite 2007). Furthermore, if
FDI seems to be beneficial in one country that does not mean it will be
beneficial in another (Pecaric et al. 2005; Vissak and Tonu Jun2005). In
this article we will not go deep into discussions about negative or
positive impact of foreign direct investments on host countries'
development, the topic, on which a vast amount of relevant scientific
literature could be found (e.g. Tvaronaviciene and Kalasinskaite 2010).
We are interested in overall developmental impact of foreign direct
investments on differently developed countries (Changwen and Jiang 2007;
Hermes and Lensink 2003; Jensen 2006; Lall and Bora 2002; Sumner 2005;
Sylwester 2005). Our objective is to evaluate the influence of foreign
direct investment on sustainable development indicators of differently
developed countries during two periods of time: a time span before and a
time span embracing the global economic crisis.
2. Impact of foreign direct investment on various facets of
differently developed countries
Scientists and politicians unanimously admit that the objective of
all economies worldwide is to ensure the developmental impact of FDI. In
order to reveal consistent patterns and peculiarities of processes
related to FDI impact on host economies, a vast amount of relevant
scientific literature has been critically reviewed.
Ample experience of developed countries lead to the following
ideas. A fairly comprehensive survey had been made by De Mello and he
concluded that in order that foreign direct investment had a beneficial
impact on growth, the country must have attained a sufficiently high
level of development. Several other studies (Hermes et al. 2003; Alfaro
et al. 2004) investigated the role of economic markets in FDI and
economic growth and discovered that countries well-developed
economically gained significantly from FDI (Jackson and Markowski 1996).
Impact of FDI depends on the development stage of the country in which
FDI take place. Blomstrom et al. (1994) find that the positive impact of
FDI on economic growth is confined to higher-income developing
countries. Borensztein et al. (1998) conclude that FDI enhances growth
only in countries with a sufficiently qualified labour force, while
other researchers claim that countries with cheaper labour force are
more competitive in attracting FDI (Tvaronaviciene et al. 2008).
Research performed by Alfaro et al. (2001) suggests that FDI is
associated with faster growth in host countries with comparatively well-
developed economic markets. Likewise, Hermes and Lensink (2003) observe
positive growth effects of FDI only after developing host countries have
improved their domestic economic systems (Nunnenkamp 2004).
The following ideas are most commonly spread while talking about
countries with lower level of development. Blomstrom et al. (1994) state
that FDI does not have a positive impact on growth mostly in what these
authors define as 'low-quality data' countries (Campos and
Kinoshita 2002).
The main insight is that for poor developing countries, in
particular, it appears much more difficult to derive macroeconomic
benefits from FDI than to attract FDI. Consequently, it has to be mainly
African countries, where FDI may have limited effects on economic growth
and poverty alleviation (Nunnenkamp 2004).
From above- presented statements some consistency can be noticed.
We presume that foreign direct investment's influence differs in
developed, developing and underdeveloped countries, i.e. depends on the
level of development: developed countries benefit most, developing less
and underdeveloped least.
3. Foreign direct investment's influence on sustainable
development indicators evaluation model
In order to test the raised hypothesis, groups of countries have to
be attributed to respective groups. For operational and analytical
purposes, the World Bank's main criteria for classifying countries
are income categories. With reference to the above-mentioned criteria
countries will be grouped for further research. High- income economies
will be ascribed to developed countries; upper-middle-income,
lower-middle-income economies to developing and low- income economies to
underdeveloped (World Bank).
The effectiveness of FDI policies also depends on whether they are
part of a broader strategy to improve the developmental impact of FDI.
Critical elements include the development of local complementary factors
of production (e.g. education and skills, local suppliers,
infrastructure and business services, approach to innovations
(Tvaronaviciene and Degutis 2007) and institutional performance
(Tvaronaviciene et al. 2009)). Before we start testing of the raised
hypothesis, indicators of sustainable development, which would be
considered in this particular investigation have to be distinguished.
Here an important note has to be made: sutainable development is a
complex and diffrently treated notion. On the one hand, it is very broad
as may be related to competitiveness of a country (Balkyte and
Tvaronaviciene 2010), and on the other hand, if to adopt a very
practical approach, sustainable development is being estimated by a
broad array of indicators (Grybaite and Tvaronaviciene 2008). We will
consider sustainable development in terms of economic viewpoint, as an
entity ensuring the elaboration of environment which meets the human
needs at present not reducing human wealth opportunities in the future.
Maintaining this approach the sustainable indicators reflecting the
betterment of humanity should improve. Hence, for our research we
selected indicators, which are sensitive to development level of the
country and obtain rather differing values in developed, developing and
underdeveloped countries. For selected, listed below indicators, which
in our case, would let introduce differences in countries'
development through particular sustainability facets, hypotheses are to
be formulated and tested.
[FIGURE 1 OMITTED]
[FIGURE 2 OMITTED]
Furthermore, the following indicators have been chosen as ones
capable of reflecting FDI impact on enhancing well-being in unevenly
developed countries: GDP, exports, inflation, population, life
expectancy at birth, primary school pupils, infant mortality, total
health expenditure per capita, total tax rate, internet users,
residential consumption of electricity. As it was indicated above,
selected indicators are seen as being of vital importance while
reflecting the differences between developed and underdeveloped
countries in the field of economic, social and business environment.
Relations were tested in the following sequence and indicated time
periods (Fig. 1).
In order to adopt presented in Fig. 1 approach towards research how
FDI flows directed into countries of different development level affect
selected indicators, countries--representatives have to be selected. FDI
flows into countries, which are to be considered in current research,
are reflected in Fig. 2.
USA, UK, Finland, Hungary, Spain represent developed countries.
Lithuania, Estonia, China, Turkey, Poland represent a group of
developing countries and Senegal, Nigeria, Tanzania, Benin,
Ghana--underdeveloped countries, respectively.
As presented-below data suggest USA and UK are recipients of the
largest FDI inflows. Then China, Spain, Hungary, Poland, and Turkey go.
To generalize, the recipients of the largest FDI inflows are developed
and developing countries. Underdeveloped countries attracted
significantly lower flows of FDI.
4. Presumptions about foreign direct investment's impact on
differently developed countries
FDI more or less contribute to developed, developing and
underdeveloped countries' economic growth.
According to Asheghian FDI had a significant impact on the United
States' economic growth (Asheghian 2004). The positive influence of
FDI on growth in Spain has been revealed as well (Rodriguez and Pallas
2008). Moreover, foreign direct investments affect Lithuanian economic
growth (Tvaronaviciene 2006). The effect of FDI on economic growth in
transition economies is positive and statistically significant in Europe
(Hannula et al. 2004). Several other literature sources indicate, that
growth from FDI in developing countries is generally not significant,
and is less than in developed countries (Wu 2001). Moreover, the rules
created in developed economies can not be efficiently applied in the
developing economies (Akhter 1993). Next scientific article states that
FDI does not have an obvious booster effect on the development of
China's economy (Changwen and Jiang 2007).
Eventually, FDI may have limited effects on economic growth and
poverty alleviation in underdeveloped countries (Nunnenkamp 2004).
From above- presented affirmations a hypothesis can be raised.
Hypothesis 1: We hypothesize that economic growth most generally is
perceived as GDP growth. Moreover, impact of FDI on GDP growth differs
in developed, developing and underdeveloped countries. Summing up,
developed countries benefit most, developing less and underdeveloped
least.
From our point of view sustainable development is being estimated
by an array of upgrading indicators. If the sustainable development
progressed, sustainable development indicators should revive and enhance
the wellbeing in each group of differently developed countries.
Maintaning the adopted approach, other hypothesis will be raised and
obtained results will enable to reveal the pecularities of FDI
performance in developed, developing and underdeveloped countries.
Exports reflect the competiveness of the country to an
international extent and is a constituent of GDP. The bigger inflows of
FDI force expansion of labour resources amount and quality, capital
amount and quality and can be effective for export growth. Moreover,
most of literature sources indicate the positive FDI impact on export
growth, what can be detected in each of country groups: FDI played an
important role in leading Chinese export growth (Haishun 1999), it
contributed to competiveness of Polish exports (Tiits 2007).
We assume that FDI has a strong impact on export growth.
There is an implication that lowering the inflation rate would
advance economic growth and bigger FDI inflows in countries (Makki and
Somwaru 2004).
We assume that FDI inflows have a solid influence on lowering the
inflation rate.
Overall, the evidence tends to suggest a potentially important role
of FDI in the country's living standards benevolence (Ting 2004).
Country's living standards will be expressed in terms of population
and life expectancy rates.
We assume that FDI has a positive impact on population
augmentation.
We assume that FDI inflows have a beneficial influence on
elongation of life expectancy rates.
The Millennium Development Goals commit the international community
to an expanded vision of development, one that vigorously promotes
social development as the key to sustaining social and economic progress
in all countries, and recognizes the importance of creating a global
partnership for development. The goals have been commonly accepted as a
framework for measuring the development progress.
The second Millennium Development Goal encourages to "Achieve
universal primary education" (World Bank). Under usual
circumstances if FDI contributes to benevolence of people's living,
it should also contribute to number of primary school pupils increase.
We assume that FDI has a benevolent impact on number of primary
school pupils' increase.
The fourth Millennium Development Goal implies "Reduce child
mortality" (World bank). Under normal circumstances the betterment
of living should be expressed in the given way as well.
We assume that FDI inflows have a beneficial impact on fewer
occurrences of infant deaths.
Combining the fifth Millennium Development Goal which states
"Improve maternal health" and the sixth which encourages to
"Combat HIV/AIDS, malaria and other diseases" we make the
following hypothesis arise (World Bank). Total health expenditure
indicator is decided to be taken for another hypothesis testing to see
how FDI affects this sphere of people wellbeing.
We assume that FDI inflows have a positive influence on total
health expenditure increase.
The theoretical and empirical evidence stressed out three main
qualitative relations between FDI and growth (UN Commission for Europe
2000a, 2000b): FDI-led growth, growth-driven FDI and bi-directional
causal process (Akhter 1993).
Business environment is one of the location factors taken into
account by investors while investing abroad [40]. We will test if there
is a growth-driven FDI or bi-directional causal processes, that is if
FDI helps business environment to improve. The bigger estimated FDI
should make total tax rates diminish under normal circumstances.
We assume that FDI inflows have a beneficial impact on total tax
rate diminution.
Also, the created wellbeing should force people make more business
or communicate with each other. The abovementioned operations can not be
conceived without Internet.
The bigger FDI inflows, the bigger number of internet users is
expected to be.
Reached welfare should force more consumption of energy.
We assume that the bigger FDI inflows contribute to residential
electric power consumption increase.
From above- presented statements the 2nd hypothesis can be
proposed.
Hypothesis 2: We hypothesize that maintaining adopted theoretical
approach, in terms of sustainable development listed aspects, the
indicators of sustainable development improve in developed, developing
and underdeveloped countries.
In order to detect strength of FDI impact on selected sustainable
development indicators, the following approach is being adopted. For
each of the country groups (developed, developing and underdeveloped) a
number of strong relationships between FDI and selected indicators is
being indicated. According to adopted view, the more strong
relationships, the stronger impact of FDI on sustainable development is
observed. In case the number of strong relationships is not considerable
or non-existent, it is considered that FDI does not affect sustainable
development in target countries group.
2.1 FDI has a positive impact on export growth.
2.2 FDI inflows have a benevolent influence on lowering inflation
rate.
2.3 FDI has a positive impact on population augmentation.
2.4 FDI inflows have a beneficial influence on elongation of life
expectancy rates.
2.5 FDI has a benevolent impact on number of primary school pupils
increase.
2.6 There is a connection between FDI inflows and fewer occurrences
of infant deaths.
2.7 FDI inflows have a positive influence on total health
expenditure increase.
2.8 Bigger FDI inflows contribute to total tax rate diminution.
2.9 The bigger FDI inflows, the bigger number of internet users is
expected to be.
2.10 The bigger FDI inflows contribute to residential electric
power consumption increase.
Summing up, developed countries benefit most, developing less and
underdeveloped least.
5. Impact of foreign direct investments on sustainable development
indicators during a time span before the global economic crisis
With the intention to test the raised hypothesis research has been
done. The method of research is correlation regression analysis.
Conveyed research method will allow to determine strong connections
between FDI and selected indicators.
While testing the first hypothesis, a number of strong connections
between FDI and GDP will be summed up in each of the country groups.
While testing the second hypothesis, a number of strong connections
between FDI and selected sustainable development indicators will be
summed up in each of the country groups. According to our both
hypothesis the biggest number of strongly affected indicators should be
in developed, less in developing and least in developed countries group.
Statistical data from 2000 till 2007 have been used for analysis
(euro monitor international). With the help of correlation regression
analysis connections have been investigated between FDI and GDP while
testing the first hypothesis and between FDI and 10 indicators while
testing the second (indicators used for analysis are presented in Table
1 and countries in Table 2). In case when 0,5 < r < 0,75 there is
a medium connection and when 0,75 < r < 0,95 there is a strong
connection, only those indicators have been chosen, which r >
[absolute value of 0,7] (Appendix A). For the following indicators r has
to be positive: GDP, exports, population, life expectancy at birth,
primary school pupils, total health expenditure per capita, internet
users, residential consumption of electricity and respectively negative
for the given: inflation rate, infant deaths and total tax rate in order
to have a beneficial influence on sustainable development. Furthermore,
in order to see if the correlation coefficient is significant,
calculated estimated t observed has to be bigger than t statistics (by 5
degrees of deg freedom using 0,05% probability) (Appendix A). Sorted out
strong connections, considered to have a beneficial impact on
sustainable development and which r is significant , are presented in
Table 3. The results of research while testing the 1st hypothesis
indicate (Table 3) that developing countries benefited Verslas: teorija
ir praktika, 2011, 12(1): 50-62 55 most (5 strong relations of FDI with
GDP), underdeveloped less (4 strong relations) and developed least (none
of the strong relations) during the 2000-2007 period. Hence, this is a
converse implication in our hypothesis, because according to our initial
hypothesis there should be most FDI affected indicators in developed,
less in developing and least in underdeveloped groups of countries.
While testing the 2nd hypothesis a finding could be made that the
biggest number of affected indicators is in developing countries group
(27 indicators), then underdeveloped countries group goes (19
indicators) and eventually the group of developed countries (11
indicators). The finding is converse to our hypothesis, because
according to our hypothesis there should be most FDI affected indicators
in developed, less in developing and least in underdeveloped group of
countries.
6. Impact of foreign direct investments on sustainable development
indicators over a time span embracing the global economic crisis period
Using the same method of research an investigation has been done
during the period of 2000-2009, time after global economic crisis struck
all the economies over the world (Tables 1, 2 and Appendix A). Provided
that t observed is bigger than t statistics (by 7 degrees of deg freedom
using 0.05% probability) (Appendix A), let us have a deeper sight what
the results indicate.
The results of research indicate (Table 4) that developing (4
strong relations of FDI with GDP) and underdeveloped (4 strong
relations) countries benefited most and developed least (none of the
strong relations) during the 2000-2009 period. This finding is opposite
to our initial hypothesis, according to which there should be most
positively affected number of FDI on GDP in developed, less--in
developing and least--in underdeveloped group of countries.
While testing the 2nd hypothesis in group of developed countries we
can observe an astonishing view- neither in USA, UK, Finland nor in
Spain there are strong connections between FDI and sustainable
indicators. Only in Hungary there is a strong relation between FDI and
exports (Table 4). In developing and underdeveloped group of countries
the results are more prolific.
While testing the 2nd hypothesis an implication could be made that
the biggest number of affected indicators is in underdeveloped countries
group (27 indicators), then developing countries group goes (19
indicators) and eventually the group of developed countries (1 indicator
). This is an inverse assessment to our hypothesis, according to which
there should be most strongly affected indicators in developed, less--in
developing and least--in underdeveloped group of countries.
In a group of developed countries infant mortality indicator is
generally positively affected by FDI. It can be distinguished that from
developing countries group the most general indicators, which are
positively influenced by FDI, come: GDP, exports, infant mortality, life
expectancy, total health expenditure, residential consumption of
electricity. In the group of underdeveloped countries it is perceived
that the following indicators are most general: GDP, population, infant
mortality, total health expenditure, total tax rate.
The normally positively influenced indicator by FDI is infant
mortality in each of the country groups. It can be stated, that FDI
inflows contribute to infant mortality decrease in those countries. FDI
also contributed to GDP growth but only in developing and underdeveloped
countries. Presumption that FDI has a positive impact on lowering
inflation rate is absolutely denied, because during that period of time
in none of the countries this had proved.
In the group of developed countries there can be noticed none of
general FDI positively affected indicators in terms that there is only
one positively affected indicator at all. In the developing countries
group we can notice some most common FDI positively affected indicators:
GDP, exports, life expectancy, total health expenditure, residential
consumption of electricity. In the group of underdeveloped countries the
following indicators are most general: GDP, exports, population, primary
school pupils, total health expenditure, total tax rate and internet
users. As in the period before a global economic crisis, the
underdeveloped countries are undeniably improving the same spheres:
economic, social and business environment, but the FDI positive
influence to those spheres is more prolific.
During a time span embracing the global financial crisis period the
most positively influenced indicator by FDI is exports in each of the
country groups. It can be stated, that FDI inflows contribute to the
increase of exports in those countries. Also, impact on GDP and total
health expenditure increase can be noticed but only in developing and
underdeveloped countries. Presumption that FDI has a positive impact on
lowering inflation rate is absolutely denied, because during that period
of time in none of the countries this had proved.
7. Conclusions
It is not sufficient for countries to attract more foreign direct
investments (FDI). Even for host countries with high attractiveness of
FDI, the challenge remains to ensure that FDI foster economic
development.
During the 2000-2009 period the biggest FDI recipients from
countries, selected for investigation, have been USA and UK. Also vast
FDI flows were attracted by China, Spain, Hungary, Poland and Turkey.
All those above-mentioned countries are from developed and developing
countries groups. Underdeveloped countries got significantly lower flows
of FDI.
Critically reviewed ample supply of relevant scientific literature
made the following presumption to arise: foreign direct investments
influence differs in developed, developing and underdeveloped countries,
i.e. depends on the level of development: developed countries benefit
most, developing less and underdeveloped least.
In the middle of 2007 and into the year 2008 a global economic
crisis struck all the economies worldwide. In case all economic
researches are precise when other conditions stay the same (ceteris
paribus), it was decided to take two periods of time (a time span
before(2000-2007) and a time span embracing the global economic crisis
period (2000-2009) to make the research more reliable. Obtained results
enabled to compare peculiarities of FDI performance during two periods
of time. Taken research method is correlation regression analysis,
significance evaluation method is Student's criterion.
15 countries, selected for investigation, are ascribed to
respective countries groups: developed, developing and underdeveloped (5
countries for each group) referring the World Bank's main criteria
for classifying countries under income categories. Selected indicators
of sustainable development have been used for research and are seen as
being of vital importance while reflecting the differences between
developed and underdeveloped countries in the field of economic, social
and business environment.
The results of research are as follows:
* Time span before the global economic crisis period (2000-2007)
The 1st hypothesis: the results of research indicate that
developing countries benefited most, underdeveloped less and developed
least. Hence, this is an opposite finding to our hypothesis.
The 2nd hypothesis: group of developing countries benefited most,
underdeveloped less and developed least. Consequently, this is an
inverse implication to our hypothesis.
* Time span embracing the global economic crisis period (2000-2009)
The 1st hypothesis: the results of research indicate that
underdeveloped and developing countries benefited most and developed
least. Hence, this is an inverse finding to our hypothesis.
The 2nd hypothesis: results of research indicate that group of
underdeveloped countries benefited most, developing less and developed
least. Accordingly, this is an opposite finding to our hypothesis.
Summarizing the findings of research we can indicate that obtained
results differ in taken two periods of time. A time span embracing the
global economic crisis period displayed the beneficial role of FDI on
sustainable development for underdeveloped countries group.
Comparing two periods of time (2000-2007 and 2000-2009) with the
last period of time (after the global economic crisis struck the
economies worldwide) underdeveloped countries closed to developing in
discussion of positive FDI impact on GDP growth. The opposite adverse
appearance referring to literature sources indications could be stated.
Hence, the relevant literature enhanced the role of FDI on GDP growth in
developed countries and understated in underdeveloped.
Comparing two periods of time, in a time span embracing the global
economic crisis period underdeveloped countries exceeded developing in
discussion of positive FDI impact on sustainable development indicators
in selected countries.
In conclusion, we can deny overall prosperous impact of FDI in
developed countries in terms of results of invisible GDP connections
with FDI. In underdeveloped and developed groups of countries
contribution of FDI to sustainable indicators improvement has been
noticed.
Even though the inflows of FDI that underdeveloped countries
attract are least, the impact of them on host countries' wellbeing
is generally obvious. We can state that FDI during a time span embracing
economic crisis period (2000-2009) significantly contributed to
improvement of economic, social and business environment alleviating
poverty. We can presume, if the things will proceed in the same manner
through the coming years, underdeveloped countries researched in our
investigation are likely to be rapidly developing.
doi: 10.3846/btp.2011.06
Received 5 November 2010; accepted 20 December 2010
Iteikta 2010-11-05; priimta 2010-12-20
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Appendices
Appendix
Correlation regression analysis results
Results of analysis before global economic crisis period: correlation
coefficients
[X.sub.1] [X.sub.2] [X.sub.3] [X.sub.4]
1. 0,21 0,55 0,65 0,08
2. 0,69 0,78 0,69 0,71
3. 0,34 0,5 0,63 0,66
4. 0,72 0,84 0,15 -0,39
5. 0,36 0,39 -0,49 0,35
6. 0,90 0,92 0,93 -0,78
7. 0,87 0,88 0,38 -0,93
8. 0,97 0,97 0,71 0,98
9. 0,91 0,91 -0,64 0,86
10. 0,90 0,90 -0,17 -0,62
11. 0,78 0,61 0,71 0,77
12. 0,78 0,75 -0,41 0,72
13. 0,79 0,74 0,68 0,78
14. 0,67 0,73 -0,38 0,63
15. 0,87 0,90 -0,56 0,77
[X.sub.5] [X.sub.6] [X.sub.7] [X.sub.8]
1. 0,28 -0,11 -0,92 0,06
2. 0,72 -0,18 -0,89 0,67
3. 0,25 -0,66 -0,88 0,28
4. 0,67 -0,73 -0,90 0,62
5. 0,36 0,84 -0,85 0,32
6. -0,90 -0,83 -0,99 0,90
7. 0,89 -0,85 -0,65 0,86
8. 0,95 -0,96 -0,98 0,99
9. 0,78 0,13 -0,86 0,88
10. 0,65 -0,80 -0,86 0,88
11. 0,79 0,73 -0,95 0,68
12. 0,71 0,80 -0,57 0,82
13. 0,78 0,67 -0,96 0,85
14. 0,62 0,54 -0,79 0,70
15. -0,54 0,92 0,74 0,90
[X.sub.9] [X.sub.10] [X.sub.11]
1. 0,45 -0,2 0,01
2. -0,76 0,31 0,14
3. -0,76 0,14 0,14
4. -0,12 0,76 0,47
5. 0,99 0,16 0,31
6. -1 0,87 0,94
7. 0,27 0,87 0,66
8. 0,83 0,96 0,98
9. -0,62 0,85 0,96
10. 0,73 0,75 0,71
11. -0,96 0,75 -0,08
12. 0,59 0,80 0,33
13. 0,75 0,54 0,07
14. -1,00 0,61 0,52
15. -0,99 0,88 0,66
t statistics of FDI and sustainable indicators interrelationship
t statistics 25705818
t observed values before global economic crisis period
[X.sub.1] [X.sub.2] [X.sub.3] [X.sub.4]
1. 0.47 1.49 1.89 0.17
2. 2.11 2.63 2.15 2.26
3. 0.82 1.29 1.81 1.97
4. 2.33 3.46 0.34 0.95
5. 0.86 0.96 1.26 0.83
6. 4.58 5.10 5.56 2.78
7. 3.88 4.14 0.91 5.50
8. 8.61 9.30 2.24 10.61
9. 4.80 4.98 1.84 3.61
10. 4.56 4.62 0.38 1.75
11. 2.82 1.71 2.25 2.71
12. 2.83 2.55 1.01 2.32
13. 2.87 2.44 2.07 2.81
14. 2.02 2.41 0.93 1.83
15. 3.92 4.53 1.51 2.72
[X.sub.5] [X.sub.6] [X.sub.7] [X.sub.8]
1. 0.66 0.25 6.34 0.13
2. 2.35 0.40 4.38 2.02
3. 0.57 1.98 4.22 0.65
4. 1.99 2.36 4.58 1.76
5. 0.86 3.51 3.59 0.75
6. 4.75 3.27 21.01 4.7
7. 4.41 3.57 1.93 3.83
8. 7.03 7.70 10.11 13.26
9. 2.78 0.29 3.82 4.17
10. 1.90 2.95 3.78 4.08
11. 2.89 2.42 7.02 2.07
12. 2.27 2.99 1.56 3.20
13. 2.79 2.04 6.07 3.62
14. 1.77 1.44 2.89 2.18
15. 1.42 5.08 2.45 4.57
[X.sub.9] [X.sub.10] [X.sub.11]
1. 1.14 0.45 0.01
2. 2.64 0.73 0.31
3. 2.60 0.31 0.31
4. 0.26 2.61 1.20
5. 16.23 0.37 0.73
6. 22.42 3.88 5.93
7. 0.63 3.94 1.98
8. 3.30 8.13 11.57
9. 1.75 3.66 8.13
10. 2.39 2.55 2.26
11. 7.75 2.56 0.17
12. 1.65 2.94 0.78
13. 2.55 1.43 0.16
14. 26.7 1.71 1.37
15. 14.48 4.13 1,96
Results of analysis including global economic crisis: correlation
coefficients
[X.sub.1] [X.sub.2] [X.sub.3] [X.sub.4]
1. 0.31 0.62 0.53 0.19
2. 0.57 0.63 0.34 0.28
3. -0.27 -0.11 0.03 -0.01
4. 0.66 0.75 0.18 -0.36
5. 0.37 0.49 0.47 0.27
6. 0.70 0.72 0.73 -0.35
7. 0.76 0.79 0.22 -0.88
8. 0.95 0.97 0.54 0.95
9. 0.83 0.82 -0.62 0.72
10. 0.67 0.72 -0.15 -0.54
11. 0.86 0.77 0.54 0.83
12. 0.70 0.71 -0.41 0.65
13. 0.83 0.85 0.74 0.86
14. 0.65 0.72 0.06 0.62
15. 0.87 0.94 -0.27 0.87
[X.sub.5] [X.sub.6] [X.sub.7] [X.sub.8]
1. 0.33 -0.19 -0.47 0.20
2. 0.42 0.04 0.16 0.48
3. -0.28 0.20 -0.03 -0.28
4. 0.49 -0.54 -0.39 0.59
5. 0.29 0.40 -0.29 0.34
6. -0.73 -0.59 -0.04 0.69
7. 0.70 -0.78 -0.22 0.77
8. 0.93 -0.92 -0.87 0.97
9. 0.70 0.20 -0.10 0.84
10. 0.53 -0.66 -0.15 0.66
11. 0.83 0.82 -0.80 0.80
12. 0.66 0.81 -0.22 0.75
13. 0.86 0.79 -0.95 0.86
14. 0.61 0.55 -0.46 0.66
15. -0.42 0.94 -0.21 0.88
[X.sub.9] [X.sub.10] [X.sub.11]
1. 0.40 -0.05 0.19
2. 0.10 0.11 0.16
3. -0.03 -0.24 -0.29
4. -0.10 0.55 0.42
5. 0.38 0.17 0.35
6. 0.31 0.60 0.70
7. 0.62 0.76 0.62
8. -0.45 0.94 0.97
9. -0.02 0.64 0.86
10. -0.33 0.61 0.66
11. -0.94 0.81 -0.21
12. 0.39 0.69 0.39
13. 0.76 0.71 0.48
14. -0.75 0.61 0.58
15. -0.87 0.94 0.70
t statistics of FDI and sustainable indicators interrelationship
t statistics 2.364624
t observed values including global economic crisis period
[X.sub.1] [X.sub.2] [X.sub.3] [X.sub.4]
1. 0.85 2.10 1.66 0.51
2. 1.85 2.15 0.94 0.77
3. 0.74 0.29 0.08 0.03
4. 2.35 2.97 0.48 1.01
5. 1.06 1.5 1.42 0.75
6. 2.60 2.74 2.79 1.00
7. 3.09 3.36 0.60 4.87
8. 8.43 11.49 1.70 7.96
9. 3.97 3.84 2.11 2.74
10. 2.40 2.76 0.39 1.70
11. 4.43 3.17 1.71 4.00
12. 2.62 2.67 1.19 2.25
13. 3.96 4.20 2.04 4.51
14. 2.25 2.71 0.17 2.10
15. 4.75 7.42 0.75 4.66
[X.sub.5] [X.sub.6] [X.sub.7] [X.sub.8]
1. 0.91 0.51 1.43 0.55
2. 1.23 0.11 0.43 1.46
3. 0.76 0.55 0.07 0.77
4. 1.47 1.70 1.12 1.93
5. 0.79 1.16 0.80 0.97
6. 2.83 1.95 0.10 2.49
7. 2.57 3.35 0.60 3.16
8. 8.90 6.10 4.75 11.27
9. 2.59 0.55 0.27 4.09
10. 1.66 2.35 0.41 2.31
11. 3.92 3.85 3.47 3.52
12. 2.35 3.61 0.59 2.98
13. 4.50 3.39 7.68 4.46
14. 2.03 1.76 1.36 2.31
15. 1.24 7.15 0.56 4.86
[X.sub.9] [X.sub.10] [X.sub.11]
1. 1.14 0.14 0.52
2. 0.27 0.28 0.42
3. 0.09 0.65 0.79
4. 0.27 1.74 1.23
5. 1.1 0.46 1.00
6. 0.88 1.96 2.57
7. 2.08 3.12 2.11
8. 1.33 7.07 9.84
9. 0.04 2.22 4.48
10. 0.92 2.06 2.3
11. 7.02 3.69 0.56
12. 1.13 2.51 1.13
13. 3.09 2.68 1.44
14. 2.97 2.04 1.87
15. 4.66 7.63 2.56
Appendix B
Current characteristics of researched countries
Developed
USA
Economic growth has resumed but fears of a double-dip recession are
mounting. The government has pledged to reduce the fiscal deficit to 3%
of GDP by 2015. Even if it meets this goal, public debt is projected to
have nearly doubled by that time, amounting to almost 75% of GDP.
UK
The economic recovery in 2010 will be an anaemic one. The economy
will not return to its trend growth rates before 2012. Spending is
depressed by weak earnings, uncertainty over the job markets and a fall
in consumer confidence.
Finland
The Finnish economy experienced a sharp recession in 2009 and
little or no growth is expected in 2010. Economic performance should
slowly improve through 2014. Growth will probably have to exceed 3% per
year in the long term if Finland's welfare system is to survive
intact.
Hungary
Hungary's economy will see little or no growth in 2010.
Unemployment is high and will rise in 2010. The government will spend
[euro]7.5 million on job creation and job preservation in 2010 and the
jobless rate is expected to trend downward beginning in 2011. The rate
of growth is not expected to reach economic potential before 2011.
Spain
Spain's recession will continue through 2010 and the eventual
recovery will be weak, in part owing to the austerity package imposed in
2010. Huge spending cuts are planned with the goal of reducing the
budget deficit to 6% of GDP by 2011. Unemployment continues to rise and
is already the second highest in the EU.
Developing
Lithuania
Lithuania's recession is expected to last through 2010 with a
recovery beginning in 2011. Real rates of growth will not reach
prerecession levels before 2020. Unemployment is in double digits and
the unemployment rate among young adults is especially high. Corruption
in some parts of economy is regarded as significant. The business
environment remains challenging for small and medium enterprises. In
order to raise FDI inflows, further improvements in business environment
is needed.
Estonia
Estonia's recession was among the worst of any European
country and only shallow growth is anticipated for 2010. The recovery
will be hindered by the decision of Gazprom, the Russian energy
supplier, to raise prices over the medium term. The real value of
private consumption will continue to drop through 2010. Long-term
demographic trends are not favourable for Estonia.
China
The Chinese economy should see double-digit growth in 2010. China
could surpass Japan to become the world's second largest economy in
2010. Private consumption will gradually emerge as a more important
contributor to growth in the medium term. Investors are attracted
because of the cheap, unskilled labour, which is about a third of the
cost of that in most other Asian countries.
Poland
Poland was able to avoid a recession in 2009 and a stronger
economic performance is expected in 2010. Poland's long-term
attractions to foreign investors will continue to hold appeal. It is a
very large and underdeveloped market with a solid export base and labour
that costs only a quarter of that in Western Europe.
Turkey
The Turkish economy began a strong recovery in 2010. However, the
country could face serious power shortages now that the recovery is
underway. As many as half of all employed workers hold jobs in the
informal sector. Unemployment remains a serious problem. Half a million
new jobs need to be created every year just to keep unemployment from
rising. The business environment suffers from various weaknesses- in
particular the lack of comprehensive legal and legislative system that
protects the rights of foreign investors.
Underdeveloped
Senegal
Real growth slowed in 2009 but a modest recovery is forecast.
Senegal has investment opportunities such as unexploited iron ore
deposits and the potential for gold mining. The country's
population is growing by around 2% per year and the economy cannot
generate a sufficient number of jobs. The government believes that real
growth of at least 7% per year is needed to reduce poverty.
Administrative barriers inhibit foreign business interests. Foreigners
argue that procedures in such areas as customs, ports and patents are
cumbersome and prone to corruption. Furthermore, contracts can be
difficult to enforce.
Nigeria
The economy should rebound in 2010 but rates of growth will still
not be sufficient to reduce poverty or unemployment. Power shortages and
a large housing deficit are other problems. An estimated 40% of
today's population is under 15 years and poorly educated. About 57%
of Nigerian households live in poverty. Growth in the non-oil sector
must be accelerated in order to achieve the desired degree of
diversification. Despite some improvements under the present
administration, the cost disadvantage of business operating in Nigeria
is considerable. Red tape, customs delays, a lack of skilled labour and
power shortages all push to operating costs. Recent banking reforms have
helped increase private sector growth and investment. The costs of
starting business have been cut, but poor infrastructure raises the cost
of doing business.
Tanzania
The rate of real growth fell in 2009 but an incipient recovery is
expected in 2010. However, an energy shortage caused by drought-induced
cuts in hydroelectric power and higher oil prices limits growth
prospects. Tanzania's low levels of savings dilapidated
infrastructure are the main drags on growth. There is a huge potential
for tourism but the sector lacks hotels and infrastructure. More than a
third of the country's population lives in poverty.
Benin
The economy is weakening owing to a combination of including energy
shortages and a fall in cotton exports. An estimated 40% of the
population lives in poverty. The stated goal of diversifying the economy
away from cotton production remains elusive. Relatively large
investments in the production and distribution of electric power are
planned in order to eliminate energy bottlenecks.
Ghana
Ghana has fared better than most economies during the global
recession and rates of growth should accelerate in the medium term.
Recent oil discoveries could provide a significant boost to the economy.
The budget deficit has soared but officials hope to reduce it by 2011.
Both unemployment and underemployment are in double-digits. Policy
makers hope to encourage participation of private sector and
infrastructure development (euromonitor international).
Manuela TVARONAVIEIENE. PhD, works as Associate Professor at
Vilnius Gediminas Technical University, Department of Economics and
Management of Enterprises. Her research interests involve tax systems
reforms in transition economies, investigation of legal tools for
conditioning of business environment and factors stimulating investment
processes in transition economies.
Toma LANKAUSKIENE. Master student at Vilnius Gediminas Technical
University, Department of Economics and Management of Enterprises.
Research interests: foreign direct investments.
Manuela Tvaronaviciene (1), Toma Lankauskiene (2)
Vilnius Gediminas Technical University, Sauletekio al. 11, LT-10223
Vilnius, Lithuania E-mails: (1)
[email protected]; (2)
[email protected]
Vilniaus Gedimino technikos universitetas, Sauletekio al. 11,
LT-10223 Vilnius, Lietuva El. pastas: (1)
[email protected]; (2)
[email protected]
Table 1. Indicators used for analysis
Y FDI (US $ mill.)
[X.sub.1] GDP (US$ mill.)
[X.sub.2] Exports (US $ mill.)
[X.sub.3] Inflation (% growth)
[X.sub.4] Population (mill.)
[X.sub.5] Life expectancy at birth: total population (years)
[X.sub.6] Primary school pupils ('000)
[X.sub.7] Infant mortality (deaths per '000 live births)
[X.sub.8] Total health expenditure ($per capita)
[X.sub.9] Total tax rate (% of profit)
[X.sub.10] internet users (number per '000 people)
[X.sub.11] Residential consumption of electricity ('000 Gwh)
Table 2. Countries used for analysis
Developed
1 USA
2 UK
3 Finland
4 Hungary
5 Spain
Developing
6 Lithuania
7 Estonia
8 China
9 Turkey
10 Poland
Underdeveloped
11 Senegal
12 Nigeria
13 Tanzania
14 Benin
15 Ghana
Table 3. Strong and significant connections between FDI and selected
indicators over a time span before the global financial crisis period
Countries
Developed
Ind. 1. 2. 3. 4. 5.
[X.sub.1]
[X.sub.2] * *
[X.sub.3]
[X.sub.4]
[X.sub.5]
[X.sub.6] *
[X.sub.7] * * * * *
[X.sub.8]
[X.sub.9] * *
[X.sub.10] *
[X.sub.11]
Countries
Developing
Ind. 6. 7. 8. 9. 10.
[X.sub.1] * * *
[X.sub.2] * * *
[X.sub.3]
[X.sub.4]
[X.sub.5] *
[X.sub.6]
[X.sub.7] *
[X.sub.8] * *
[X.sub.9]
[X.sub.10] *
[X.sub.11]
Countries
Underdeveloped
Ind. 11. 12. 13. 14. 15.
[X.sub.1] * * * *
[X.sub.2] *
[X.sub.3]
[X.sub.4] * * *
[X.sub.5] * *
[X.sub.6] * *
[X.sub.7] * * *
[X.sub.8] * * *
[X.sub.9] * * *
[X.sub.10] * *
[X.sub.11]
Table 4. Strong and significant connections between FDI and selected
indicators over a time span embracing the global financial crisis
period
Countries
Developed
Ind. 1. 2. 3. 4. 5.
[X.sub.1]
[X.sub.2] *
[X.sub.3]
[X.sub.4]
[X.sub.5]
[X.sub.6]
[X.sub.7]
[X.sub.8]
[X.sub.9]
[X.sub.10]
[X.sub.11]
Countries
Developing
Ind. 6. 7. 8. 9. 10.
[X.sub.1] * * *
[X.sub.2] * * *
[X.sub.3]
[X.sub.4] *
[X.sub.5] * *
[X.sub.6]
[X.sub.7]
[X.sub.8] * *
[X.sub.9]
[X.sub.10] *
[X.sub.11] * *
Countries
Underdeveloped
Ind. 11. 12. 13. 14. 15.
[X.sub.1] * * *
[X.sub.2] * * * *
[X.sub.3]
[X.sub.4] * *
[X.sub.5] *
[X.sub.6] * * *
[X.sub.7] *
[X.sub.8] * * *
[X.sub.9] * *
[X.sub.10] * *
[X.sub.11] *
