Foreign Direct Investment in Developing Countries

Abstract: Article history: Received March 1, 2019 Received in revised format April 1, 2019 Accepted April 4 2019

Abstract: Purpose The purpose of this article is to analyse electricity supply in the Solomon Islands face extraordinarily expensive electricity tariffs – currently set at 96 c/kWh – making them amongst the highest in the world. Power is supplied by a fleet of diesel generators reliant on imported liquid fuels. In this article, the authors model the 14,100 kW power system on the island of Guadalcanal and demonstrate that by investing in a combination of hydroelectric and solar photovoltaic generating capacity, power system costs and reliability can be improved marginally. However, when the authors model a 3-Party Covenant (3PC) Financing structure involving a credit wrap by the Commonwealth of Australia, electricity production costs fall by 50 per cent, thus resulting in meaningful increases in consumer welfare. Design/methodology/approach This study’s approach uses an integrated levelised cost of electricity model and dynamic partial equilibrium power system model. Doing so enables the authors to quickly analyse the rich blend of fixed, variable and sunk costs of generating technology options. The authors also focus on the cost of capital that is likely to be achieved under various policy settings. Findings The authors find that a 3PC Financing policy can substantially reduce the production costs associated with capital-intensive power projects in an unrated sovereign nation. Such a policy and associated prescriptions are not specific to the Solomon Islands or power generation. The conceptual framework and associated financial logic that underpins the initiative can be generalised to other “user pays” infrastructure projects and to other developing nations. The broad applicability of 3PC financing means that it is not country specific, project specific or asset class specific. Research Limitations/implications It is important to note that the analysis in this paper has a number of limitations in that the authors do not deal with rural electrification or distribution network costs. The focus of this paper is to identify policy interventions that are capable of making profound changes to the cost and the reliability of wholesale electricity production. Originality/value The focus of this paper is to identify a policy intervention capable of making profound changes to the cost and the reliability of wholesale electricity production. While there is nothing novel associated with a 3PC Financing per se, the authors are unaware of its direct use as a form of delivering foreign aid. A 3PC Financing has the effect of shifting the source of aid funding from fiscal account surplus/deficit (i.e. cash outlays) to balance sheet (i.e. credit wrap). However, this is not a “magic pudding” – 3PC Financing creates an asset-backed contingent liability and will have the effect of reducing the donor country’s own debt capacity by a commensurate amount, holding the nation’s credit rating constant.

Abstract: This paper revisits the relationship between unskilled immigration and skilled wage in the context of the BREXIT episode. Our simple general equilibrium model introduces a household sector, the inclusion of which shows that both return to capital and effective skilled wage may increase with a greater inflow of immigrants. This is a novel outcome in the theory of trade and factor flows. In addition, though technical progress in a skill‐intensive sector raises wage inequality, it no longer displaces traditional jobs. Here, the usual negative impact of unskilled immigration on the traditional sector is mitigated by increased returns to the unskilled workers.

Abstract: The first 19 chapters of this book focus on changes in well-being from national and regional perspectives. This chapter summarizes the book’s major findings concerning global changes in well-being, with special emphasis on the critically important changes that have occurred in global well-being since the end of World War II. The major findings confirm that all eight of the world’s major regions (including the poorest regions and despite regional variations) experienced significant improvements in well-being (in health, education, and income) over the 34-year period from 1980 to the end of 2014. These gains often were dramatic and occurred possibly as a function of high levels of international cooperation on the part of governmental, intergovernmental, and private sector investments, including those made by transglobal businesses. Major advances in global health well-being were achieved through much needed investments by governments, businesses, and other actors in the private sector directed at advancing the quality of preventive and primary health care across a wide range of health services. Expenditures in the heath sector now average more than 10 % of national gross domestic product, and those expenditures made in richer countries now equal or exceed 17 % of total gross domestic product, remarkable investment levels in just one sector. Health care increases in the public and private sectors were most notable for Latin America and the Caribbean, North America, sub-Saharan Africa, and, most recently, East Asia and the Pacific region. In the United States and European nations, levels of health expenditures well exceeded 17.4 % of national gross domestic product and continue to increase at a more rapid pace than investments in other sectors. A consequence of these expenditures has been substantial increases worldwide in average years of life expectancy as well as steep declines in rates of infant, child, and maternal mortality. Thirty-four years of increases in global investments in education are also impressive—the most dramatic of which took place in the countries of North Africa and West Asia and in sub-Saharan Africa. Significant progress was achieved in increasing primary and secondary school enrollment levels as well as access by qualified adults to higher education and career-oriented technical schools. Today, enrollment in primary schools includes more than 91 % of age-appropriate children and the percentage is increasing. Even so, cross-national increases in levels of economic well-being progress slowly, and poverty levels remain high in many countries in which children are not receiving formal education. In response to the dilemma of chronic poverty, many countries have developed public approaches to well-being through carefully targeted publicly administered but privately funded social security taxes, general sales taxes, and estate taxes for those who leave estates beyond a certain threshold, as well as taxes targeted at luxury consumer goods and services. These initiatives have proven to be especially successful in reducing poverty levels in economically advanced countries and in countries with high levels of economic growth, e.g., developing countries of East and South Asia in which literally hundreds of millions of people have been lifted out of abject poverty. Similar changes have occurred among many of the small island developing nations of the South Pacific and, surprisingly, among many of the Arctic peoples of the circumpolar region. These important advances in poverty alleviation also are reflected in the emergence since 1950 of more progressive development trends in East and Central Europe, the newly independent countries of Central Asia, those of North America, and those in some countries of sub-Saharan Africa. Also of relevance to progress in well-being is the fact that the vast majority of the populations of economically advanced and developing countries now live in urban rather than rural communities. In all, significant progress in well-being has been achieved as a result of carefully implemented taxation and public policies in combination with rapidly expanding housing, social, and economic opportunities for the growing numbers of urban residents.

Abstract: Foreign direct investment is identified as the major tool for the movement of international capital. Thus, the study has employed a review research to examine the determinants of foreign direct investment in Saudi Arabia. The results are significant as they have contributed towards determinants of foreign direct investment by comparing with previous studies. The results showed that trade openness, infrastructure availability, and market size play significant role in attracting foreign direct investment within a country. The inflow of foreign direct investment has a potential to benefit the investing entity as well as the host government. It also renders economic growth and socioeconomic transformation of the country. The flow of foreign direct investment in Saudi Arabia is affected by several factors including growth rate, GDP, exports and imports. It is the duty of the government to ensure the attractiveness of their country to maintain maximum flow of foreign direct investment, as it promotes sustained long-term economic growth by increased investment in the human capital.