Article Sidebar

Download
PDF
Statistic
Read Counter : 975 Download : 864

Downloads

Download data is not yet available.

Main Article Content

Abstract

Purpose­­­ – This study investigates the driven factors of Foreign Direct Investment (FDI) inflow in selected OIC member countries. The selection of samples observation based on the top 10 hosts of inward FDI flows countries, includes the United Arab Emirates (UAE), Morocco, Indonesia, Turkey, Iran, Egypt, Bangladesh, Kazakhstan, Oman, and Malaysia.

Methodology – The data for this study are obtained from World Bank and United Nations Development Programme (UNDP) database for the period 2001-2018. This study adopted panel regression analyses and utilized the Random Effect Model.

Findings – This study reveals that GDP and trade openness were positive and significantly plays a vital role in driving the FDI inflow. Whereas, the exchange rate, inflation, and human development index did not have a significant impact on FDI inflow in the top 10 hosts of inward FDI flows countries.

Research limitation – The main limitation of this research is the lack of a variable that represents the Islamicity index, which can differentiate the driven factors of FDI in Muslim and non-Muslim organization countries.

Practical implication – This study suggests that members of OIC countries should provide a conducive investment environment which is represented by higher GDP growth and engage in various international trade agreements because those factors have higher possibilities in impacting the FDI inflow. Moreover, the rules which describe the investment priority amongst the member of OIC countries must be ratified immediately to decrease the percentage of the FDI inflows goes to non-OIC members.

Originality – This study has advanced the knowledge by examining the driven factors of FDI in the specifically selected members of OIC countries, which based on the highest FDI inward. Thus, this study provides significant insights for policymakers for the rest of the member OIC countries to attract FDI inflows referring to the top 10 hosts of inward FDI flows countries.

 

Article Details

License

Copyright (c) 2020 Authors

Creative Commons License

This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Authors who publish with this journal agree to the following terms:

  1. Authors retain copyright and grant the journal right of first publication with the work simultaneously licensed under a Creative Commons Attribution License that allows others to share the work with an acknowledgment of the work's authorship and initial publication in this journal.
  2. Authors are able to enter into separate, additional contractual arrangements for the non-exclusive distribution of the journal's published version of the work (e.g., post it to an institutional repository or publish it in a book), with an acknowledgment of its initial publication in this journal.
  3. Authors are permitted and encouraged to post their work online (e.g., in institutional repositories or on their website) prior to and during the submission process, as it can lead to productive exchanges, as well as earlier and greater citation of published work (See The Effect of Open Access).
How to Cite
Supriani, I., & Fianto, B. A. (2020). What drives the inflow of FDI in OIC countries? Evidence from Top 10 hosts of inward FDI flows. Jurnal Ekonomi & Keuangan Islam, 6(2), 91–105. https://doi.org/10.20885/jeki.vol6.iss2.art2
Download Citation
Endnote/Zotero/Mendeley (RIS)
BibTeX
Crossref
Scopus
Google Scholar
Europe PMC

References

  1. Akadiri, A. C., Gungor, H., Akadiri, S. Saint, & Bamidele-Sadiq, M. (2019). Is the causal relation between foreign direct investment, trade, and economic growth complement or substitute? The case of African countries. Journal of Public Affairs, August, 1–12. https://doi.org/10.1002/pa.2023
  2. Alfalih, A. A., & Bel Hadj, T. (2020). Foreign direct investment determinants in an oil abundant host country: Short and long-run approach for Saudi Arabia. Resources Policy, 66(February), 101616. https://doi.org/10.1016/j.resourpol.2020.101616
  3. Alfaro, L., Chanda, A., Kalemli-Ozcan, S., & Sayek, S. (2004). FDI and economic growth: The role of local financial markets. Journal of International Economics, 64(1), 89–112. https://doi.org/10.1016/S0022-1996(03)00081-3
  4. Arul Provin Binny, M., & Morarji, A. (2019). Economic determinants of foreign direct investment in India. International Journal of Recent Technology and Engineering, 8(3 Special Issue), 505–507. https://doi.org/10.35940/ijrte.C1105.1083S19
  5. Asiamah, M., Ofori, D., & Afful, J. (2019). Analysis of the determinants of foreign direct investment in Ghana. Journal of Asian Business and Economic Studies, 26(1), 56–75. https://doi.org/10.1108/jabes-08-2018-0057
  6. Aziz, O. G. (2018). Institutional quality and FDI inflows in Arab economies. Finance Research Letters, 25(August 2016), 111–123. https://doi.org/10.1016/j.frl.2017.10.026
  7. Camarero, M., Montolio, L., & Tamarit, C. (2019). What drives German foreign direct investment? New evidence using Bayesian statistical techniques. Economic Modelling, 83(February), 326–345. https://doi.org/10.1016/j.econmod.2019.08.017
  8. Canh, N. P., Binh, N. T., Thanh, S. D., & Schinckus, C. (2019). Determinants of foreign direct investment inflows: The role of economic policy uncertainty. International Economics. https://doi.org/10.1016/j.inteco.2019.11.012
  9. Cieslik, A. (2019). Determinants of foreign direct investment from OECD countries in Poland. Eurasian Economic Review, 0123456789. https://doi.org/10.1007/s40822-019-00136-y
  10. Corcoran, A., & Gillanders, R. (2015). Foreign direct investment and the ease of doing business. Review of World Economics, 151(1), 103–126. https://doi.org/10.1007/s10290-014-0194-5
  11. Coulibaly, S. K., Erbao, C., & Metuge Mekongcho, T. (2018). Economic globalization, entrepreneurship, and development. Technological Forecasting and Social Change, 127(September), 271–280. https://doi.org/10.1016/j.techfore.2017.09.028
  12. Doing Business Database. (2013). Does Doing Business matter for foreign direct investment? https://www.doingbusiness.org/content/dam/doingBusiness/media/Annual-Reports/English/DB13-Chapters/DB13-CS-Doing-Business-matter-for-FDI.pdf
  13. Economou, F. (2019). Economic freedom and asymmetric crisis effects on FDI inflows: The case of four South European economies. Research in International Business and Finance, 49(January), 114–126. https://doi.org/10.1016/j.ribaf.2019.02.011
  14. Eissa, M. A., & Elgammal, M. M. (2019). Foreign Direct Investment Determinants in Oil Exporting Countries: Revisiting the Role of Natural Resources. Journal of Emerging Market Finance. https://doi.org/10.1177/0972652719880153
  15. Furqani, H. (2019). What is Islamic economics? The view of Muhammad Baqir al-Sadr. Jurnal Ekonomi & Keuangan Islam, 5(2), 63–71. https://doi.org/10.20885/jeki.vol5.iss2.art3
  16. Ge, G. L., Stringer, C., & Ding, D. Z. (2017). Chinese FDI in New Zealand: What are Chinese investors looking for? Thunderbird International Business Review, 50(3), 385–399. https://doi.org/10.1002/tie.21871
  17. Govori, F., & Fejzullahu, A. (2020). External Financial Flows and GDP Growth in Kosovo. Journal of Developing Societies, 36(1), 56–76. https://doi.org/10.1177/0169796X19898964
  18. Haidar, J. I. (2012). The impact of business regulatory reforms on economic growth. Journal of the Japanese and International Economies, 26(3), 285–307. https://doi.org/10.1016/j.jjie.2012.05.004
  19. Hossain, M. T., Hassan, Z., Shafiq, S., & Basit, A. (2018). Ease of Doing Business and Its Impact on Inward FDI. Indonesian Journal of Management and Business Economics, 1(1), 52. https://doi.org/10.32455/ijmbe.v1i1.52
  20. Hsiao, C. (1985). Benefits and limitations of panel data. Econometric Reviews, 4(1), 121–174. https://doi.org/10.1080/07474938508800078
  21. Hsiao, C. (2007). Panel data analysis-advantages and challenges. TEST, 16(1), 1–22. https://doi.org/10.1007/s11749-007-0046-x
  22. Iamsiraroj, S. (2016). The foreign direct investment-economic growth nexus. International Review of Economics and Finance, 42, 116–133. https://doi.org/10.1016/j.iref.2015.10.044
  23. Ibhagui, O. (2020). How does foreign direct investment affect growth in sub-Saharan Africa? New evidence from threshold analysis. Journal of Economic Studies, 47(1), 149–181. https://doi.org/10.1108/JES-06-2018-0198
  24. Islamicity Foundation. (2019). Islamicity Indices. http://islamicity-index.org/wp/latest-indices-2019/
  25. Jaiblai, P., & Shenai, V. (2019). The determinants of FDI in sub-Saharan economies: A study of data from 1990–2017. International Journal of Financial Studies, 7(3). https://doi.org/10.3390/ijfs7030043
  26. Khan, M. K., Teng, J. Z., & Khan, M. I. (2019). Cointegration between macroeconomic factors and the exchange rate USD/CNY. Financial Innovation, 5(1). https://doi.org/10.1186/s40854-018-0117-x
  27. Kishor, N., & Singh, R. P. (2015). Determinants of FDI and its Impact on BRICS Countries: A Panel Data Approach. Transnational Corporations Review, 7(3), 269–278. https://doi.org/10.5148/tncr.2015.7302
  28. Kurul, Z., & Yasemin Yalta, A. (2017). Relationship between institutional factors and FDI flows in developing countries: New evidence from dynamic panel estimation. Economies, 5(2). https://doi.org/10.3390/economies5020017
  29. Lausberg, B. (2010). The Effect of Cultural and Political Factors on FDI Between the US and Partner Countries [Erasmus University Rotterdam]. https://thesis.eur.nl/pub/7640/Lausberg, B. 325537 - id thesis7640 .pdf
  30. Maryam, J., & Mittal, A. (2020). Foreign direct investment into BRICS: an empirical analysis. Transnational Corporations Review, 0(0), 1–9. https://doi.org/10.1080/19186444.2019.1709400
  31. Onafowora, O., & Owoye, O. (2019). Public debt, foreign direct investment and economic growth dynamics: Empirical evidence from the Caribbean. International Journal of Emerging Markets, 14(5), 769–791. https://doi.org/10.1108/IJOEM-01-2018-0050
  32. Organisation of Islamic Cooperation. (2020). History. https://www.oic-oci.org/page/?p_id=52&p_ref=26&lan=en
  33. Rani, R., & Kumar, N. (2019). On the Causal Dynamics Between Economic Growth, Trade Openness and Gross Capital Formation: Evidence from BRICS Countries. Global Business Review, 20(3), 795–812. https://doi.org/10.1177/0972150919837079
  34. Redmond, T., & Nasir, M. A. (2020). Role of natural resource abundance, international trade and financial development in the economic development of selected countries. Resources Policy, 66(December 2019), 101591. https://doi.org/10.1016/j.resourpol.2020.101591
  35. Ridzuan, A. R., Ismail, N. A., & Hamat, A. F. C. (2018). Foreign direct investment and trade openness: Do they lead to sustainable development in Malaysia? Journal of Sustainability Science and Management, Specialissue4, 79–97.
  36. Sahoo, M., & Sethi, N. (2020). An Empirical Insight into the Financial Globalization–Growth Nexus via Trade Openness: Evidence from Select South Asian Countries. Global Business Review, 1–18. https://doi.org/10.1177/0972150919893840
  37. Sahu, J. P. (2020). Do Large Foreign Direct Investment Inflows Behave Differently From Smaller Inflows? Evidence from Developing Countries. Margin, 14(1), 86–106. https://doi.org/10.1177/0973801019886488
  38. Saini, N., & Singhania, M. (2018). Determinants of FDI in developed and developing countries: a quantitative analysis using GMM. Journal of Economic Studies, 42(2), 348–382. https://doi.org/10.1108/JES-07-2016-0138
  39. Sajilan, S., Islam, M. U., Ali, M., & Anwar, U. (2019). The determinants of FDI in OIC countries. International Journal of Financial Research, 10(5), 466–473. https://doi.org/10.5430/ijfr.v10n5p466
  40. Sathe, S., & Handley-Schachler, M. (2006). Social and cultural factors in FDI flows: evidence from the Indian states. World Review of Entrepreneurship, Management and Sustainable Development, 2(4), 323–334. https://doi.org/10.1504/WREMSD.2006.010217
  41. SESRIC. (2010). Annual Economic Report on the OIC Countries. https://www.sesric.org/files/article/410.pdf
  42. SESRIC. (2011). Annual Economic Report on the OIC Countries. https://www.sesric.org/files/article/438.pdf
  43. SESRIC. (2019a). International Finance OIC Statistical Outlook.https://www.sesric.org/files/article/655.pdf
  44. SESRIC. (2019b). OIC ECONOMIC OUTLOOK. https://www.sesric.org/files/article/655.pdf
  45. SESRIC. (2019c). OIC ECONOMIC OUTLOOK 2019: Mobilizing Financial Resources for Development. 1–146. http://www.comcec.org/en/wp-content/uploads/2019/11/3-Outlook-2019-EN.pdf
  46. Tah, K. A., Czerniak, C., Levine, A., Wiggin, K., & Osondu, I. N. (2019). Foreign trade and economic growth in South Africa. Asia-Pacific Journal of Accounting and Economics, 00(00), 1–10. https://doi.org/10.1080/16081625.2019.1567352
  47. The World Bank. (2020). Doing Business. https://www.doingbusiness.org/en/reports/global-reports/doing-business-2020
  48. Tsitouras, A., Mitrakos, P., Tsimpida, C., Vlachos, V., & Bitzenis, A. (2020). An Investigation into the Causal Links Among FDI Determinants: Empirical Evidence from Greece*. Journal of East-West Business, 26(1), 17–55. https://doi.org/10.1080/10669868.2019.1640829
  49. Wani, N. U. H. (2019). Nexus between Openness to Trade and Economic Growth: An Empirical Investigation of Afghanistan. South Asia Economic Journal, 20(2), 205–223. https://doi.org/10.1177/1391561419858242
  50. Weib, J., Sachs, A., & Weinelt, H. (2018). 2018 Globalization report: who benefits most from globalization? Bertelsmann Stiftung, 80. https://doi.org/10.1063/1.3241134