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The impacts of corruption and environmental degradation on foreign direct investment: new evidence from the ASEAN+3 countries

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  • Mohd Shahidan Shaari
  • Miguel Angel Esquivias
  • Abdul Rahim Ridzuan
  • Nor Fadzilah Zainal
  • Lilik Sugiharti

Abstract

Foreign direct investment (FDI) plays a vital role in boosting economic growth and providing more job opportunities. Hence, it is imperative to investigate the factors that can spur FDI inflows in the Southeast Asia region (ASEAN) and its three largest trading partners: China, Japan, and South Korea (ASEAN+3). Besides, whether corruption can boost or decrease FDI inflows, and whether larger environmental degradation triggers FDI inflows have been sparsely explored by previous studies. The panel Autoregressive Distributed Lag (ARDL) approach is employed to analyze the period from 1995 to 2020. The results show evidence of the grabbing hand hypothesis in ASEAN+3 as decreasing corruption can positively impact FDI inflows in the long run. However, the results support that increasing environmental degradation has spurred FDI in the region, suggesting reformulating investment promotion policies towards more environmentally friendly ones. These findings are important for policymakers to formulate the right policies for boosting FDI. Punishment for those who act in a corrupt manner may act as a deterrent to would-be offenders. Using more renewable energy could help to reduce environmental degradation and boost FDI simultaneously.

Suggested Citation

  • Mohd Shahidan Shaari & Miguel Angel Esquivias & Abdul Rahim Ridzuan & Nor Fadzilah Zainal & Lilik Sugiharti, 2022. "The impacts of corruption and environmental degradation on foreign direct investment: new evidence from the ASEAN+3 countries," Cogent Economics & Finance, Taylor & Francis Journals, vol. 10(1), pages 2124734-212, December.
    • Handle: RePEc:taf:oaefxx:v:10:y:2022:i:1:p:2124734
    DOI: 10.1080/23322039.2022.2124734
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    Citations

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    Cited by:

    1. Muryani Muryani & Khoirun Nisa’ & Miguel Angel Esquivias & Siti Hafsah Zulkarnain, 2023. "Strategies to Control Industrial Emissions: An Analytical Network Process Approach in East Java, Indonesia," Sustainability, MDPI, vol. 15(10), pages 1-17, May.
    2. Mohd Shahidan Shaari & Faiz Masnan & Mohd Juraij Abd Rani & Zaharah Zainal Abidin & Abdul Rahim Ridzuan & Norreha Othman, 2023. "The Grim Cost of Economic Growth and Environmental Degradation: A Comprehensive Panel ARDL Study of Public Debt in the ASEAN-5 Countries," Sustainability, MDPI, vol. 15(14), pages 1-15, July.
    3. Yen Nguyen & Son Le & Nam Ngo & Huyen Nguyen, 2023. "Impacts of FDI and Environmental Pollution in ASEAN Countries: The Role of Institutions," International Journal of Energy Economics and Policy, Econjournals, vol. 13(5), pages 242-250, September.
    4. Acheampong, Alex O. & Opoku, Eric Evans Osei, 2023. "Environmental degradation and economic growth: Investigating linkages and potential pathways," Energy Economics, Elsevier, vol. 123(C).

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