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

Faheem Ur Rehman, Md. Monirul Islam and Kazi Sohag ()

International Journal of Emerging Markets, 2022, vol. 19, issue 4, 1026-1050

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.

Keywords: Infrastructure; FDI; GMM; Belt and Road Initiative countries; C23; F12; F14; F36; O24; O47 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eme:ijoemp:ijoem-03-2022-0395

DOI: 10.1108/IJOEM-03-2022-0395

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