Does infrastructure promote exports and foreign direct investment in selected Southeast Asian economies? An application of global infrastructure index

Abstract

PurposeInfrastructure deficiency in Southeast Asian countries is ever growing and touched to a level where it harms the local economy as well as the international sector of the country. The gap between demand and supply for infrastructure is constantly on the upswing. The purpose of this study to investigate the effect of infrastructure on exports and foreign direct investment (FDI) inflow in selected Southeast Asian economies.Design/methodology/approachThis study employs the pooled mean group (PMG) technique to velaborate that how the infrastructure affects export and FDI in the short run and long run during 1990–2018. For cointegration, Pedroni and Kao tests are used. Dynamic ordinary least square (DOLS) and the fully modified least squares (FMOLSs) estimators are employed for robustness check.FindingsThe findings support that aggregate and sub-indices of infrastructure significantly promote the export and FDI inflow in the long run. Also infrastructure, export and FDI inflow are cointegrated in the long run. FMOLS and DOLS found the most robust results.Originality/valueInfrastructure development in determining trade and FDI has established a significant deal of attention in the modern era where a plethora of research studies encourage the opinion that better infrastructure attracts FDI and enhances export. However, this study uses a global infrastructure index, which comprises the sub-indices like transport, telecommunication, energy and financial sector, which gives us a clear picture regarding how Southeast Asia can catch up FDI and export benefits through infrastructure.

Determinants of foreign direct investment in Malaysia

“…H3: Education has a favourable effect on FDI inflows in Malaysia. Rehman and Noman (2021) investigate the effects of infrastructure on exports and FDI inflows between 1990 and 2018. The proxy of infrastructure in the research was represented by the global infrastructure index, a composite index that brings together 30 indicators representing the quality and quantity of sectorial infrastructure comprising the transport, communication, energy, and financial sectors.…”

Why did they get in trouble? The influence of firm characteristics and institutional distance on Chinese firms’ foreign market entry attempt

“…Beginning with exporting ( Rehman and Ding, 2020 ; Rehman et al, 2020 ), China has accumulated ample foreign currency reserve. With the development of domestic institutional settings and infrastructure ( Rehman and Noman, 2020 , 2021 ), Chinese firms are increasingly active in the international arena. In recent years, the outflow of Chinese capital has increased considerably.…”

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

“…, 2003; Asiedu, 2002). A recent study by Rehman and Noman (2021b) and Rehman and Yibing (2019) reveal that southeast countries and Pakistan enjoyed a higher inflow of FDI due to their developed infrastructure. Furthermore, the study of Donaubauer et al.…”

“…The first strand of empirical literature documents that a developed infrastructure spurs international capital mobility (Wang and Lin, 2022;Coughlin, et al, 1991;Wheeler and Mody, 1992;Cheng and Kwan, 2000;Bellak et al, 2009;Li and Park, 2006;Deichman et al, 2003;Asiedu, 2002). A recent study by Rehman and Noman (2021b) and Rehman and Yibing (2019) reveal that southeast countries and Pakistan enjoyed a higher inflow of FDI due to their developed infrastructure. Furthermore, the study of Donaubauer et al (2016) affirms that a developed infrastructure attracts FDI inflow in developed and developing countries.…”