Measuring the impact of foreign direct investment on exports in a sample of middle-income developing countries for the period (1990-2020)

Abstract

Foreign direct investment is considered one of the most important sources of capital flows. It is also considered one of the basic pillars that enable the investment of the country’s human and natural resources. Foreign investment can play an important role in this process, as it is intended to use the investor’s surplus funds in investment tools and opportunities available in the markets. Foreign investments outside the borders of the resident investor’s country. These investments differ from local investments in terms of the nature of the investment instruments used, the currencies traded, and the degree of risks to which the investor is exposed. This study aims to measure the impact of foreign direct investment on exports for the period (1990 - 2020) in developing countries using a sample of middle-income developing countries. The results showed that at the level of middle-income countries, there was a direct relationship between inward foreign direct investment and exports, with a ratio of (0.218), while outward foreign direct investment had a direct relationship with exports, with a ratio of (0.232). The study suggested directing foreign investments towards export industries, especially industries that can replace imports, with the aim of improving the balance of payments. It also recommends directing investments away from local investments to avoid competition with local investments. The study suggests diversifying foreign investments into various industrial, agricultural, and service sectors, and getting rid of investments linked to one sector, such as oil. We should also benefit from modern technology accompanying these investments and partnering with local investment sectors to gain skills and stimulate them. In this way, the impact of foreign investments in improving the country’s economic structure and achieving Long-term benefits at the economic level. It will also contribute to developing local industries and increasing the competitiveness of the national economy in global markets.

Keywords

• Foreign direct investment, exports, middle-income developing countries.