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    Foreign direct investment and economic growth in small island economies : the case of Solomon Islands : a thesis presented in partial fulfillment of the requirements for the degree of Master of Arts in Economics at Massey University, Palmerston North, New Zealand
    (Massey University, 2012) Ragimana, Elizabeth Versey
    The role of foreign direct investment (FDI) has been recognised as a catalyst in the growth of developing nations in that it brings additional sources of capital investment and foreign savings. In addition to its primary aim as a source of capital formation, FDI also brings productive benefits, which include employment creation, technology transfer and associated spillover effects; skills development; trade and competitiveness; and access to foreign markets. As such, FDI is viewed in many studies as a key driver of economic growth, since it enhances profitability of domestic investment; transforms the host country’s ownership structure of total investment; complements funding for domestic investment and improves the productive sectors of the economy. This study examines several hypotheses relating to the linkage between FDI inflows and economic growth in the case of Solomon Islands. First, the study investigates the contribution of FDI to economic growth (i.e. the FDI-led growth nexus) in Solomon Islands. Second, it examines the main determinants of FDI (i.e. the growth driven-led FDI nexus). Finally, the productivity effects of FDI (i.e. the FDI-productivity nexus) on the main sectors of primary, manufacturing and services are evaluated. The directions of causality between selected variables for these three hypotheses are also examined. Using time series data for the period from 1970 to 2010, the autoregressive distributed lag approach to cointegration is utilised to evaluate the FDI-led growth nexus and the growth driven-led FDI nexus. The Granger causality approach is adopted to evaluate the direction of causality between the selected FDI and growth variables. The FDI-productivity nexus is analysed using the stepwise and Granger causality approaches for the period 1985-2010. The empirical findings of the FDI-growth nexus show that FDI inflows, domestic investment, trade openness and labour are major influential factors of economic growth in the Solomon Islands. For the growth driven-led FDI nexus, the empirical findings show that economic growth, domestic investment, openness, exports, and infrastructure are all important determinants of FDI inflows. However, the civil strife and political instability, and high inflation deter FDI inflows and are detrimental to economic growth. In the FDI-productivity nexus, the primary and services sectors benefit the most from the productivity effects of FDI inflows complemented by better institutions, education, infrastructure and a stable political environment. The findings not only have important policy implications for the Solomon Islands but also for other small island economies.
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    Factors determining location choice of foreign direct investment in China : a perspective from an inland province : a thesis presented in partial fulfillment of the requirements for the degree of Doctor of Philosophy in Management at Massey University (Albany), New Zealand
    (Massey University, 2009) Liu, Yulong
    This study aims to formulate a conceptual framework regarding foreign direct investment (FDI) location choice made by multinational enterprises (MNE) and to investigate factors determining FDI location choices, through empirically testing the framework and associated hypotheses in the research setting of one of China's inland regions. FDI has been widely recognised as a major driving force of globalisation, which is a powerful catalyst for achieving national economic development and global integration of MNEs. In respect to the various key issues of MNE's FDI, the location choice is complex, multidimensional, and critical and it affects the economic growth of host countries, as well as the efficiency and effectiveness of the MNE's investment abroad. Considering that the emerging economies, such as China, have achieved dramatic development on FDI flows, this new phenomenon of FDI location in emerging economics challenges the existing FDI location theories, which were built in the setting of developed countries. The existing literature also suggests that more attention should be paid to the examination of FDI locational determinants, as the existing literature in this field has been dominated by research into FDI location at a cross-national level. At the sub-national level regional differences in terms of FDI location choice can be examined at great length. It is, therefore, expected to bring forth more accurate and concrete evidence regarding the sensitivity of FDI decisions to locational determinants. To address the research gap of FDI location choice, this study develops a conceptual framework regarding FDI location choice by MNEs based on an integration of various FDI theories. Hypotheses derived from the framework are empirically tested using data collected through a postal questionnaire survey. The survey was conducted during the period from December 2006 to March 2007 in Gansu - an inland province of China. All foreign-invested enterprise firms in Gansu were included in the sample and the survey resulted in 106 firms returning valid responses. The conclusions drawn from this study suggested that an investing firm's FDI location choice is made based on the consideration of a scries of factors, including the firm's capability, location factors from host region, strategic motives, and internalisation factors. This study contributes to the literature of FDI location choice by constructing a conceptual framework that can explain foreign direct investment location choice of MNEs in a setting of an inland region of a developing country. The empirical evidence from the study supports the contention that firm size, international experience, cost factor, investment incentives, agglomeration, investment risk and other factors in regards to the firm's strategic motives, play a critical role in FDI location choice in China's inland regions.
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    The impact of politics on stock return dynamics in emerging markets : a thesis presented in fulfilment of the requirements for the degree of Doctor of Philosophy in Finance at Massey University
    (Massey University, 2012) Civilize, Sireethorn
    It is argued that politics plays a vital role in emerging capital markets. This thesis focuses on three specific political aspects and examines how each of these aspects could impact the stock return dynamics in emerging markets. Firstly, to examine the relationship between political risk and stock returns, political risk ratings from ICRG observed during the period of 1984 – 2007 is employed for the analysis. This thesis finds the magnitude of political risk change to be larger in emerging markets than in developed ones and the presence of global convergence in political risk between these two markets portfolios after the year 1995. Moreover, the influence of political risk is found to be greatest on the aggregated returns of Pacific Basin markets as opposed to other emerging and developed markets. This essay thus provides important implications for international investors that there are differences in political risk exposures among the different types of market and investing in Pacific Basin emerging markets can increase the level of risk and affect the risk-return characteristic of their investment portfolios. Secondly, an investigation is made on the differences between the stock returns of ten emerging markets under military and civilian regimes. This thesis provides evidence that there is no significant difference in stock returns between military and civilian governments for eight of the ten markets being examined. However, military rule is found to be a stock price factor for two markets being those of Pakistan and Thailand. Such military returns premiums found in these two countries do not appear to be explained by economic cycle fluctuation, extreme stock market slumps, the error term, or returns volatility. The findings are robust to the control of worldwide stock market movements as well as to the test of spurious regression bias and randomisation-bootstrap. The findings provide important information for investors that the shifts from civilian to military government in Pakistan and Thailand do not increase the risk level of their investment portfolios. However, such findings observed in these two countries are country-specific and cannot be applied to all countries under military governments. Lastly, the relationship among political connectedness, stock returns, and firm values in Thailand is examined. From a newly hand-collected sample of Thai firms observed over the period 1987 to 2008, this thesis finds that there are differences in the stock returns and financial performance of firms with different levels of political connection. The findings suggest that firms which are connected to higher level politicians are associated with higher stock returns. This is particularly prevalent for firms in tightly regulated industries. Highly connected firms are also associated with better financial performance and earnings prospect than those with lower level of connection. Moreover, this thesis finds the incidence of political connections to be higher for firms with long establishment and listed firms seek political affiliations regardless of where their headquarters are located in Thailand. The evidence strongly suggests that the stock market participants do incorporate factors such as political connection into their investment decisions and the level of corporate political connectedness is a stock price factor in Thailand.
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    The role of foreign direct investment in socio-economic development : a case study of Vietnam during the transition period : a thesis submitted in fulfillment of the requirements for the degree of Doctor of Philosophy at Massey University, Turitea Campus, Palmerston North, New Zealand
    (Massey University, 2001) Pham, Hoang Mai
    The role of Foreign Direct Investment (FDI) in the socio-economic development of developing countries, especially countries in transition toward a market-oriented economy, has been the topic of debate between several schools of thought, notably the mainstream and radical views. The mainstream view argues that FDI flows cover the savings-investment, foreign exchange, technological and fiscal gaps in developing countries, and hence promote economic growth. In contrast, the radical view argues that FDI flows are detrimental to socio-economic development, they have not supplemented but substituted for domestic savings, and thus they have deteriorated the balance of payments and failed to address poverty problems in developing countries. In reality, FDI flows have provided positive impacts on socio-economic development in some developing countries, especially Asian newly industrialising countries (NICs), but generated many detrimental effects in other developing countries. In Asian NICs, FDI flows tend to be useful and have fewer detrimental effects because the governments of those countries have intervened appropriately and created favourable environments for FDI through implementing export-oriented industrialisation strategies. In the case of Vietnam, about $35.3 billion of FDI was committed, of which $14.2 billion was implemented, over the 1988-1998 period. Such large amounts of FDI flows have created significant impacts on the socio-economic development of Vietnam. Over the 1988-1998 period, FDI flows have accounted for around one-third of Vietnam's investment, over 20 percent of Vietnam' exports in 1998 and overall, between 1 percent to 1.5 percent of annual GDP growth. However, the unequal allocation of FDI flows between regions and provinces in Vietnam may promote socio-economic development in some regions and provinces but also widen the gap between rich and poor regions. The overall success of attracting and utilising FDI flows in Vietnam has been attributed to the role of government policies that maximise the positive impacts and minimise the detrimental effects of FDI flows. Government's tax preference policies and domestic protection policies have been found to play an important role in the performance of foreign-invested enterprises.