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Determinants of FDI in South Asia

Author Affiliations

  • 1 BITS Pilani K. K. Birla Goa Campus, NH 17/B, Zuarinagar, Goa, INDIA

Int. Res. J. Social Sci., Volume 2, Issue (1), Pages 1-6, January,14 (2013)

Abstract

Since the early 90s the countries of South Asia have embarked upon a process of reform and liberalization to open up their economies to foreign investment. Foreign direct investment is seen as a very important parameter in accelerating the process of growth and development in these developing economies and hence, is an important priority for the governments of these nations. A series of initiatives have been undertaken by these countries over the last 20 years to increase the inflow of FDI. But it’s very important to understand the precise set of policy measures that can create maximum and help these countries in achieving their goals. This report analyses the determinants of FDI in South Asia. Six countries – India, Bangladesh, Pakistan, Sri Lanka, Nepal and Maldives were studied and GDP, Direct Investment, Trade Openness, Real Effective Exchange Rate, Interest Rate and Labour are the parameters taken into consideration. The time period of the study is 1990 to 2010. The econometric results show that Trade Openness, GDP and Direct Investment have a positive impact on FDI whereas Labour had a negative influence. These results can be justified by studying the political and economic developments over the past 20 years. Therefore, if the countries of South Asia want to continue to attract FDI they should focus on bolstering the GDP, strengthening the level of direct investment to improve the infrastructure available and focus on increasing trade openness wherever possible

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