The Impact of Greenfield-FDI on Socio-Economic Development of Pakistan

Abstract

A multinational corporation usually invests in foreign countries in two modes of Foreign Direct Investment (FDI) encompasses, Greenfield-FDI (GFDI) and Merger & Acquisition (M&A). Mostly Asian countries have experienced improved economic growth from the incoming Greenfield-FDI. The existing studies reveal that GFDI plays undeniably a very important role in the process of economic growth and economic development of a host country's economic performance. Thus, the goal of this study is to know the effect of GFDI inflow on education, health, living standard, and economic development for Pakistan, while using data set from 1990-2018. This study used the Correlation matrix, Augmented Dickey-Fuller (ADF), and Philips Peron (PP) tests for unit root, Auto Distributive Lag model (ARDL), and Error Correction Model (ECM) as estimation techniques. The empirical results indicate that there exists a long-run relationship between GFDI, health, and economic development by Human Development Index (HDI) only. In the long-run GFDI, remittances, and foreign trade have positive, while foreign aid by Official Development Assistance (ODA) and inflation rate negatively affect the life expectancy index, which might mean negative health effects. These findings suggest some important policy measures can be adopted to take more benefits of FDI and stimulate economic growth and socioeconomic development.

Does Greenfield Foreign Direct Investment Inflow contribute in Socioeconomic Development? Empirical Evidence from Developing Countries

“…Greenfield-FDI, remittances, trade and population have significantly positive impact on education but aid and inflation are negatively and insignificantly related to education. These outcomes are supported by the results of (Luu, 2016), (Zhuang, 2017) and (Raza et al, 2020). In the second model of this study, Greenfield-FDI, trade, and population have a significantly positive relationship with health, while remittances have an insignificant relationship.…”

“…The authors used the GMM technique and analyzed that Greenfield investment positively correlates with socio-economic development, economic growth, health, and education. Similar findings were also initiated in the study of (Raza et al, 2020) by examining the impact of Greenfield investment on the socio-economic development of Pakistan. The authors used time-series data from 1990-2017 and applied ARDL and ECM models.…”

“…Additional findings have shown that population has a marginal impact on GFDI of developed countries. (Raza et al, 2020) studied the effect of investments in Greenfield on the welfare of developing countries in Africa for the period 1998-2017. The authors used the GMM technique and analyzed that Greenfield investment positively correlates with socio-economic development, economic growth, health, and education.…”

“…Based on equation ( 5), this study further used four more models for education, health, economic growth, and socioeconomic development. This ARDL PMG model has been used in (Raza et al, 2020) and (Asghar et al, 2020) research.…”

Is Greenfield Investment Greener for the Welfare of Lower-Middle Income Countries? Market based Empirical Analysis with GMM Approach

“…Greenfield investment also helps in the well-being of a host nation (Luu, 2016). In another study by Raza et al (2020b), GMM technique was used to show the position of African developing countries between 1998 and 2017. According to the findings of the study, greenfield investment enhanced the economic growth and development of African host developing countries.…”