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Does infrastructural development allure foreign direct investment? The role of Belt and Road Initiatives

Author

Listed:
  • Faheem Ur Rehman
  • Md. Monirul Islam
  • Kazi Sohag

Abstract

Purpose - China's Belt and Road Initiative (BRI) is the most ambitious investment strategy for infrastructural development belonging to the significant potential for stimulating regional economic growth in Asia, Europe and Africa. This study aims to investigate the impact of infrastructure on spurring inward foreign direct investment (FDI) within the purview of human capital, GDP per capita, foreign aid, trade, domestic investment, population and institutional quality in BRI countries. Design/methodology/approach - In doing so, the authors analyze panel data from 2000 to 2019 within the framework of the system generalized method of movement (GMM) approach for 66 BRI countries from Europe, Asia, Africa and the Middle East. Findings - The investigated results demonstrate that aggregate and disaggregate infrastructure indices, e.g. transport, telecommunications, financial and energy infrastructures, are the driving forces in attracting foreign direct investment (FDI) in the BRI countries. In addition, control variables (i.e. institutional quality, human capital, trade, domestic investment, foreign aid and GDP per capita) play an essential role in spurring FDI inflows. Originality/value - The authors’ study uniquely investigates both the pre- (2000–2012) and post- (2013–2019) BRI scenarios using the aggregate and disaggregate infrastructural components from the perspectives of full and clustered sample regions, such as Asia, Europe, Africa and the Middle East. The study provides several policy implications.

Suggested Citation

  • Faheem Ur Rehman & Md. Monirul Islam & Kazi Sohag, 2022. "Does infrastructural development allure foreign direct investment? The role of Belt and Road Initiatives," International Journal of Emerging Markets, Emerald Group Publishing Limited, vol. 19(4), pages 1026-1050, August.
    • Handle: RePEc:eme:ijoemp:ijoem-03-2022-0395
    DOI: 10.1108/IJOEM-03-2022-0395
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    More about this item

    Keywords

    Infrastructure; FDI; GMM; Belt and Road Initiative countries; C23; F12; F14; F36; O24; O47;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • O24 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Trade Policy; Factor Movement; Foreign Exchange Policy
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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