Analysis of factors effecting foreign direct investment

Foreign direct investment is an interest as a controlling possession in a business in one country by a substance situated in one more country. It is subsequently documented from an unskilled portfolio conjecture by a thought of direct control.

FDI is assessed of unfamiliar responsibility for resources, for example, production lines, mines, and terrains. Expanding unfamiliar speculation can be utilized for example one measure of rising monetary globalization. During the most recent thirty years, there has been a remarkable development in worldwide Foreign Direct Investment (FDI). In 1981 the all-out load of FDI rose to just 6.59 percent of world Gross Domestic Product (GDP), while in 2004 the portion of GDP had expanded to near 23.52 percent as per the United Nations Countries of Trade and Development Report (2004). This has been occurred simultaneously because of huge development in worldwide exchange. The development in worldwide progressions of merchandise, and capital suggests that the worldwide monetary framework is turning out to be progressively interconnected as financial movement is broadened across limits. FDI is a fundamental part of the globalization way of activity as it escalates the communication between states, areas, and Multinational Corporations. Universally ascending of FDI, worldwide exchange, data, what’s more, movement is large parts of this movement. This paper examines various elements of a state that impact FDI. The best option of exploration subjects has been made to let for the probability of finding results that can give information about the idea of FDI with the point to help the arrangement producers of the host country and the contributing nation to make appropriate choices for the advance and develop of economies to the two nations.

FDI: the venture may be made all things considered by gaining an infrastructure in the neutral nation or “naturally” by growing the tasks of a present business in that state.

FDI is used to show a business choice to obtain a considerable stake in an unknown business or to make it out and out to prosper its activities to a different area. This is not to show business security in an unknown organization. Many factors are there that impact this investment in any country. These factors need a deep understanding for the sake of an increase in the FDI. The factors that attract the investors and the factors that stop investors from investing are impotent to recognize and then to improve for building up a great and better economy.

• Statement of problem

After 1950 the structure of the world was a bit more changed and the population of the world expanded. As the population grew faster the rate of GDP also grew for some countries and the rate of per capita also.

The FDI also increased because of the development of the financial situations and work quality and load in the host country. With the help of FDI, most of the countries that started availing more and more opportunities want the FDI to be increased so that they provide more facilities and good rates to the investors’ countries. The gain in this system is beneficial for both the host as well as the investor. The host countries try to make the investor country in many other new projects for sake of new investment. The investment can bring many opportunities for the nation that host that program the host country also provides many useful profits for the investor.  Moreover, foreign businesses can also come up with new creations and abilities to the host nation. This increases the work abilities and resources to increase in the host country’s general market. It is important to notice all the factors that affect FDI for improvement of inflow of FDI. (Waqas Ahmed,2014)

• Research Question

To be investigated in this research the research question is given below.

• What is a foreign direct investment in any country depends upon multiple factors.? What are the factors that have a great impact on foreign direct investment in any country?
• How do imports of a country attract other countries or parties to invest in the country?
• What is the impact of the Gross national product on the flow of FDI.?
• What is the effect of exports of a country on foreign direct investment?
  • Research objectives:

The main objective of this study is to find out that the factors already mentioned in the research question are how much effect causing on foreign direct investment. Following are our major objectives.

• To identify the impact of imports on FDI
• To analyze the impact of exports on FDI
• To analyze the impact of GDP on FDI.
  • Research Hypothesis:

The hypothesis of this study include:

• FDI depends on many other independent factors.
• Imports of a country are positively related to the FDI inflow in that country.
• Exports of a country are positively related to the FDI inflow in that country.
• GDP of any country also affects how do other countries see the opportunity to invest their money in that country
  • Theoretical background:

As per the preceding hypothesis of Stephen Hymer’s that shows the 1960’s explanation of FDI that was based on financial backgrounds on a greater level. This hypothesis depends on an older hypothesis in which the exchange of services was clear between two countries, while both were trying to maintain the financial position on a minimal level. For example, international relations were based on three basics, absolute expenditure profits, item separation benefits, and economies of scale. The same is the case of FDI, which depends on many factors and is vital in the economic build-up.

Testing the issues of his paradigms, Hymer focused in his speculation on consummation in agreement to¬¬ the widespread market. The theory proposed by the maker approaches the overall hypothesis from another and even more firm-unequivocal point of view. Maybe than standard macroeconomics-based theories of adventure, Hymer states that there is a relation between gross capital, to the business opportunities in the country. Many other theories are there related to FDI inflow. The theories also suggest that the military expenditures of a country also impact the investor’s decision to invest in the country. (Pervez Shahid,2014)

Furthermore, he clarifies that FDI is actually an improvement of resources from a country of beginning to a host country and that it is centered around explicit organizations inside various countries. Strangely, if credit charges were the rule point of view in overall theory, FDI would fuse various endeavors inside countries, like its infrastructure, imports, exports, and production capability.

 

Another discernment made by Hymer clashed with what was stayed aware of by the neoclassical hypotheses: Foreign direct investment isn’t confined to the hypothesis of excess advantages abroad. For sure, foreign direct investment can be financed through credits got in the host country, portions as a trade-off for esteem (licenses, advancement, mechanical assembly, etc), and various strategies. The guideline determinants of FDI are side similar to the improvement framework of the economy of the country when FDI is made. Hymer proposed some more determinants of FDI as a result of responses, close by tolerating business areas and blemishes. These are according to the accompanying:

Firm-explicit benefits: Once a homegrown venture was depleted, a firm could take advantage of its benefits connected to showcase defects, which could give the firm market power and an upper hand. Further investigations endeavored to clarify how firms could adapt these benefits as licenses.

Evacuation of struggles: struggle emerges if a firm is as of now working in an unfamiliar market or hoping to extend its tasks inside a similar market. He suggests that the answer for this obstacle emerged as arrangement, imparting the market to adversaries or endeavoring to procure an immediate control of creation. Notwithstanding, it should be considered that a decrease in struggle through procurement of control of activities will build the market defects.

Affinity to detail an internationalization procedure to moderate danger: According to his position, firms are described with 3 degrees of dynamic: the everyday oversight, the executive’s choice coordination, and long haul system arranging and dynamic. The degree to which an organization can relieve hazard relies upon how well a firm can define an internationalization procedure considering these degrees of choice.

Hymer’s significance in the field of global business and FDI comes from being quick to guess about the presence of worldwide ventures and the purposes for FDI past macroeconomic standards, his impact on later researchers and hypotheses in worldwide business, like the possession, area, and internationalization, hypothesis by John Dunning and Christos Pitelis which centers more around exchange costs. Also, “the proficiency esteem creation part of FDI and MNE movement was additionally fortified by two other major insightful advancements during the 1990s: the asset-based (RBV) and transformative theories” moreover, a portion of his forecasts later appeared, for instance, the force of supranational bodies on FDI for example, IMF or the World Bank that builds disparities (Dunning and Piletis, 2008).

1.6 Theoretical framework

In the kingdom of Bahrain, foreign direct investment holds great importance. In Bahrain, there is already existing foreign direct investment in the field of finances and Banking. Bahrain needs to attract more investment in other fields like education, health, and industry. foreign direct investment is closely related to the collective national income because it improves employment and inflation in the country. The GDP is also closely related to the foraging direct investment. A good GDP is supposed to attract more foreign direct investment and as well as foreign direct investment is done mostly in the countries with good GDP. foreign direct investment creates jobs, for the people of the country, making the economical conditions better for the country, the provision of jobs elevated the standard of living and hence the development of the country speeds up.

• the volume of foreign direct investment

the foreign direct investment in the recent decade is getting more volume in developing countries like India. The developing countries provide a low-cost production, their tax rates are low, they provide raw material at low cost and all these points attract foreign investment.

• Foreign investment field.

Today the world is progressing in every field. Foreign direct investment is done in the countries on the basis of the interest of the people. In developed countries, the investment is done in the field of technology but in developing countries, the investment holds a share in fields of clothing, food, and industry.

• Procedure

The foregoing direct investment has to be done in a proper way that requires completing all the legal requirements of the host country. In this way, they need to follow the rules and laws related to property, worship, taxation, and legalization.

• Obstacles and problems

Some problems that the investors face in the process of the investment are the provision of raw materials, the transportation facilities in the countries. The culture and the language gap also create a problem between the collaboration of local staff members and the foreign management.

• Solution of the problem

The problems related to the cultural gap and logistical hurdles can be solved in order to study the culture before investing and offering jobs to the local folks. The selection process requires a great deal of investigation in the recruitment of a higher degree of staff members.

Foreign investment was seriously impaired in the time of COVID 19. The poor economic and business conditions created a big gap in investment. In the past decade, the investment in the field of food brands and clothing was too high but in this era of the pandemic, the investment scored 44% lower compared to the previous years. For the future years, a better plan is to be followed for attracting foreign direct investment. This requires making the country free from the COVID and creating a safe and healthy environment.

 

 

1.7 Scope and limitations of the study

This study holds its significance in the field of investment and development of a country. The host country’s increase in work and employment while on the other hand, the increase of business profit and recognition are the basic gains of the investor country. This research covers all the major aspects like this in the field of FDI.  This study will help the country to make it possible for it to gain more and more investments and get developed in years.

This study focuses on the main factors that affect the investment of any other country in another country so the scope of this study is wide enough to cover all the aspects of a country’s condition that attract other inventors to invest their money and get involved in that country. As it is clear that many factors are there that reinforce or prevent any investor to do investing in any country.

In this study, we could not cover all the factors that affect foreign direct investment because of the shortness of time as well as the wideness of the topic. We cannot close the list of all hundred percent factors in a single study. Moreover, the resources were not enough to conduct high universal research and for generalized results.

Definition of key terms:

FDI

It can be defined as the purchase in the company of interest by any company or any investor that is located outside the borders of the company.

Factors:

The factors can be defined as the circumstances or the influence that are helpful in contributing to the results.

 

Chapter 2

Review of related literature and studies

Related literature

Foreign direct investment is a matter of interest for their searches nowadays. Many researchers now and in the past also studied foreign direct investment. Foreign direct investment has helped many counties in their development by improving their infrastructure, introducing new technologies there, and providing the people with jobs. This contribution increased their income. The decreased amount of aid provided to developing countries and their rapidly increasing population has increased the need for foreign direct investment in these countries. In their research, Bushra Yasmin and Muhammad Ali Chaudhary focused on the factors that are affecting foreign direct investment in developing countries. The research was done in 15 countries that are considered as low-income countries and middle-low-income countries. In underdeveloped or developing countries the rate of foreign direct investment has been varying since the 1980s. In some years the investment from foreign companies was quite high but in some years the rate of foreign direct investment decreased. The study and analysis of data showed that in the countries with low income the factors affecting the foreign direct investment are their GDP, standard of living, and inflation. In the countries having a low middle income, the factors affecting foreign direct investment were a domestic investment, labor, internet public investment, external debt, and urbanization. Foreign direct investment is directly affected by structural differences.  The countries with high GDP receive a high amount of foraging direct investment because the investors get more business expansion and earn more profit there as compared to those countries that have low GDP. The countries that want more foreign direct investment should review their policies in order to provide the investors with low debt and more domestic investment. To make them feel free to invest, these countries should provide them with trade openness.

 

In Pakistan, the economy heavily depends on foreign direct investment. Many companies already are working in the country that foreign supported. The country is considered as developing. The economy is not that much stronger but is growing with time. The country’s production line is weak because of the unavailability of investment money. The industrial sector is not well developed and the political instability also created a pity situation. The country. The population is rapidly increasing and the job opportunities are decreasing, leaving people unemployed. The country needs foreign direct investment for generating more jobs for the people and for industrial development. In the past years, foreign direct investment in Pakistan was seriously affected by many factors like general income, business situation, capital, and government instability. The war situation in past decades increased the military debt of the country that made the foreign investors feel unsafe for investing here in Pakistan. The state bank of Pakistan is now paying attention to these details and policies that affect the foreign direct investment in the country. Some economic issues like import-export and capital formation also need to be taken up by the federal government, otherwise, the conditions regarding foreign direct investment can get worsen. The major reason for the decreased interest of foreign investors can also be the country’s imports are the final products but they export the raw material this imbalance in imports and exports is retained foreign direct investment. In the past few years, the government has gotten some stability so the policies regarding foreign direct investment are revived and sustained over a long time that making the foreign direct investment increase. The gross national product of the country shows the capacity and output of the population, it increases the foreign direct investment will also increase.

Bhagwati ensured that the impact of foreign direct investment on improvement appeared, apparently, to be positive in case of item propelling countries, not if there ought to emerge an event of little-making economies. This concentrate in the like manner revealed that the foreign direct investment to GDP extent and current record balance to GDP extent of eight advancement economies had shown a negative relationship. Akhtar separated the locational determinants of foreign direct investment. The maker argued that market size, change the standard and relative advance expense had a positive and basic relationship with foreign direct investment stock. Lehman found that essential changes in the external records of a country happen in view of foreign direct investment inflows. Trade straightforwardness and host country possibilities are found to be an accomplice to the advantage of foreign direct investment and gaining repatriations is still uncertain through consistent benefit payout extent. Woodward ensured that foreign direct investment streams have contributed extensively to current record shortages. Using data from six economies the outcomes of the audit showed that foreign direct investment was one of the key components liable for current record shortages in these countries. By making foreign direct investment equivalent to credit, the survey battled that subsequent getting back of the capital from the recipient country was the same as repayments of the loan. Fedderke besides, Romm tried foreign direct investment determinants inside South Africa by utilizing co-compromise close unintentional correction methods. Their disclosures showed that political risk, property opportunities, market size, work cost, straightforwardness, and corporate cost rates were critical factors in attracting foreign direct investment. Aqeel and Nishat precisely perceived the variables of foreign direct investment improvement in Pakistan for the period 1960 to 2004. They used co-blend close-by bumble update techniques for perceiving factors that affect the level of foreign direct investment. The results had shown that corporate appraisal rate, import obligations, trading scale, degradation of the rupee, and progression measures had a positive and basic relationship with foreign direct investment. Moolman focused on the stock side determinants of foreign direct investment in South Africa for the period 1971-2004. The disclosures pointed out that responsiveness, size of the market, apparent exchange rates, and establishment were the factors that methodology makers in South Africa should zero in on while attempting to attract foreign direct investment. Hossain showed that the fundamental impact of an inflow of foreign direct investment on BOP is positive yet the medium-term effect could end up being either certain or negative as the monetary sponsor increases their imports of momentary work and items, and begin to restrict advantage.

 

Related studies

 

Tn lay yoke and Yond Kah Chun conducted research to investigate the factors affecting foreign direct investment. The research was done in Malaysia. They in their research mentioned the following details. Foreign direct investment is a determinant of development in low-income and middle low-income countries. The foreign direct investment increases the jobs for the public of host countries as well as makes the lifestyle better for the people by increasing the overall economic growth and approach to new technology. The foreign direct investment also increases the production of the host country making it renowned in the international market. Foreign direct investment not only increases the opportunities for the people but also increases their skills. Foreign direct investment if one gets successful in a country attracts more investment. When one company gets good business and lasting profit in a host country, other companies also pay attention to the country for investment and establishing their business. Study shows the economy of Malaysia also heavily depends on foreign direct investment. The job availability and skillfulness also depend greatly on foreign direct investment in Malaysia. Foreign direct investment increased the production capacity that made the business of exporting goods to flourish in Malaysia. This betterment created an elevation in economic growth. The foreign direct investment changed in trends by 1996 that made the researchers investigate the factors affecting it. The factors like exchange rate, rising prices, infrastructure, and China foreign direct investment seem to affect the rate of foreign direct investment in Malaysia.

In 2016 research, Christopher lee investigated the factors affecting foreign direct investment in America. They mentioned that the possibility of foreign direct investment isn’t new to the business world. In any case, its advantage in the current economy is ending up being continuously huge. Since Foreign direct venture consistently brings progression, work, and flourishing to a neighborhood ought to get what components attract foreign direct investment to unequivocal regions. Understanding the factors can help metropolitan regions with changing to end up being more appealing to outside putting associations as time goes on. As of now, there are a couple of articles explaining the spot factors for foreign direct investment in changing and making countries. These examinations perceived a couple of determinants like foundations, agglomerations, and trade responsiveness. It has been fought that in making and evolving countries, these are the factors that choose the space of unfamiliar direct speculation. Another research argues that determinants of foreign direct investment will, by and large, be both country express and monetary patron unequivocal. As noted, there is a tremendous proportion of investigation focusing on these disputes regardless; there is a gigantic shortfall of studies focusing on foreign direct investment factors in made locales like the US and Europe. One survey, concerning the US, found that factors like work, examination and improvement use, and state spending on tutoring were positive and quantifiably basic determinants of foreign direct investment inflow into the US. A report on unfamiliar direct speculation, dispersed by The Financial Times of London, communicated that the fastest creating recipient of foreign direct investment in the market for feasible power. Europe’s harmless to the ecosystem power market delivered the most unfamiliar direct interest in 2010, with America in second place. The last survey, by Oxford Daily Service, focused on the southwest region of the US and covered the components that organized foreign direct investment to this specific locale. One part consolidated the close-by relationship with Mexico and the NAFTA understanding. Another critical part impacting the space of foreign direct investment is the locale’s utilization of imaginative work. “Creative work suggests interest in imaginative work endeavored proficiently to assemble the inventory of data and its application – including fundamental assessment, applied investigation, and preliminary headway” Innovative work in unequivocal fields, for instance, development can attract outside firms that are enthused about the neighborhood tries. Regardless, if the new firm is a low-tech association, research shows there is a low tint with R&D and adventure. Regardless, one method of attracting foreign direct investment to a specific region is to give more money to investigate thusly, attracting high development or investigating unequivocal new pursuits.

Most African nations are battling to emerge from destitution. One of the jug necks for their turn of events attempt is the accessibility of capital. Worldwide endeavors are viewed as a feature of the improvement arrangement for quite some time, particularly for nations where capital is the most difficult to find the asset. foreign direct investment FDI  is seen as a significant upgrade to monetary development in agricultural nations however there are problematic perspectives on the issue. El Magazine tracks down that FDI and efficiency development for the host economy is not altogether related to emerging nations. By far most studies on the opposite space in the opposite, as we will see soon, have featured the significance of FDI for financial development according to alternate points of view. They contend its capacity to manage complex significant deterrents of improvement, to be specific, deficiencies of monetary assets, innovation, and abilities, has made it perhaps the best competitor of advancement instruments. Numerous nations and squares of nations have profited from this wellspring of money of improvement. A review on African nations observes that FDI positively affects the development of the Gross domestic product in African nations. One more review on change economies pin focuses that Total Variable Productivity and Gross Domestic Product in those nations developed along with the inflow of FDI and the minimal commitment of FDI to GDP is more prominent than that of homegrown speculation. Blalock and Gertler observe solid proof of efficiency gains, more noteworthy contests, and lower costs among nearby firms in business sectors that supply unfamiliar participants for developing business sectors. Borensztein proposes that FDI is a significant vehicle for the exchange of innovation, contributing somewhat more to development than homegrown speculation does. In another review, Padilla-Perez shows that innovation moves from FDI might affect various entertainers of the host district (neighborhood firms, colleges, research focuses, industry affiliations). FDI is found to have constructive outcomes on financial development straightforwardly and through its association with work. Levchenk and Mauro contend that FDI contrasted with different types of monetary streams gives better security against emergencies. Bashier and Bataineh recognize FDI builds homegrown savings, which is one more vehicle for nearby speculation. These are a portion of the examinations so far that recognize positive connections between FDI and monetary turn of events.

 

Zenegnaw Abiy Hailu in his paper targets giving an observational investigation of the interest side determinants of the inflow of Foreign Direct Speculation to African countries, with specific accentuation on securities exchange accessibility. Because of information heterogeneity, non-coherence and on the grounds that the Hausman test favors it, cross-area fixed impact Least Square Dummy Variable assessment method is utilized. Regular asset, work quality, exchange receptiveness, market increase and framework condition are found to have positive and critical impact. Accessibility of financial exchange has the anticipated positive yet unimportant impact. Looking for conceivable clarification state run administrations’ use and private homegrown speculation are added to the relapse condition and are found to have constructive outcome, precluding the chance of swarming out impact. Securities exchanges in Africa are not organized so that they can add to draw in FDI and subsequently strategy producers ought to rebuild capital business sectors to benefit from them. The main concern is, strategy producers of those nations have a ton of interesting side instruments under their watchfulness to draw in FDI inflow. His paper concentrates on the impact of host district factors on the inflow of FDI to Africa. As a general rule, the outcomes support the finding of past explorations for most boundaries. From the asset side, normal asset and work quality are found to have constructive outcomes. The outcome likewise shows that keeping a stable world of politics plays a job in drawing in FDI. Foundation states of the host nation and exchange receptiveness are decidedly identified with FDI inflow. These show that arrangement creators can impact the inflow of FDI by, say, keeping a stable political climate, empowering exchange, and upgrading the framework state of the country. Financial exchange accessibility has an unimportant impact on FDI inflow, however the sign is positive and true to form. To shed light on conceivable clarification, two additional factors were added to the relapse condition, in case such a peculiarity is an aftereffect of some kind of swarming out impact either by the homegrown private area or general society area. As a matter of fact, both government consumption and private homegrown ventures are adversely related with FDI inflow. One potential clarification for the negative connection between private homegrown speculation and FDI inflow could be nations that don’t get high FDI might raise capital from the neighborhood capital market. With regards to the government use, legislatures in most African nations are engaged with financial exercises that can be embraced by private areas, both homegrown and unfamiliar. Thus, swarming out is the most probable opportunity for the converse connection between the financial exchange FDI inflow and both private homegrown venture and government consumption. In this case, state run administrations should focus on playing facilitator job, rather than straightforwardly take part in venture exercises.

 

Synthesis of the study

 

Foreign direct investment is an investment done by someone from a different economy in a different economy the basic purpose of this investment is to get lasting profit. The foreign direct investment can be of two types which depends upon the flow of capital. If the flow of capitals is from the outer economy to the local economy, it is said as inward. When the local capital is invested in the outer economy the investment is said to be outwards, and formally named as, direct investment abroad. According to Tamazain the factors affecting foreign direct investment can be divided into following categories: economic factors, political factors, institutional factors and socioeconomic factors. The factors that come under the section economic are the rising prices in the country, the economic growth and the gross national product of the host country. The institutional factors are the government, corruption and reputation in the world. The political factors that affect the foreign direct investment is the political stability in the country and the degree of the application of law and order. Moreover, the peace conditions in the country and the trends of public affairs in the host country are also considered as political factors, sometimes the relationships of the host country with other countries also affect the foreign investment. In some countries terrorism is a risk of life as well as for the investment which refrain the foreign investors from investing in the country. Political issues like rapid change in government, Marshall law and civil war, all are the major factors that affect the foreign direct investment. More stable the government more the rate if foreign direct investment in the country. The technology is also a great factor affecting foreign direct investment, the country that have accessed to high and modern technology are more likely to get investment by foreign investors. While the countries having no technologies are less likely to receive any investment from the foreign investors. Like in some countries fast internet is still not available in some areas, this gives a point to think to the investors. The countries which have capacities to fully facilitate the foreign investors are at top of the list for being foreign invested. Infrastructure also plays a great role in attracting the foreign investors. The infrastructure of a country shows its progressiveness and modernity. Highly developed countries have highly developed and facilitated buildings and have great structures like smart cities. These things help the host country to get a good foreign direct investment. All these factors help build our research about the factors affecting foreign direct investment.

 

Chapter 3

 

Methodology of the research

In this chapter the detailed discussion about the methodology of the research, sampling style and tools used in analysis of the data will be provided. The procedure of data collection and the statistical analysis along with the table illustration will be discussed in this chapter.

The factors like economic growth, GDP, import and export of the country were major focus of the study to investigate their effects on foreign direct investment.

Research design

The method or approach used to collect the data, assessing and arranging the data and the interpretation of the data is called the research design. The procedure and framework of doing all the work you do to answer your research question is called the research design.

In this research the empirical approach was used. In the process of data collection, the participants were given a brief detail about the situation and the research. The purpose and the aim of research was disclosed to the participants to get the actual data and information about the variable and its effects that were seen by the people on their own level. Special questionnaires were designed for the people directly associated with the industry and their provided data was analyzed with use of tools.

 

Population of the study

The People associated with the economy of the country, workers of multinational companies, the executives of the foreign companies working Bahrain were our population for getting data. Some of the data was also collected by the country’s past years economic health archives and the investment got in past years.

 

Sampling procedure

The website of the International businesses was used to collect basic data from where to get participants. The participants were related to finance and business that participated in data collection of our research.

 

Sampling technique

In this study the technique of Krejcie and Morgan was used to determine the sample size. Random sampling was done for the collection of data through questionnaires. Total Participants were taken 151.

 

Research instrument

The survey was used as the instrument of the study. Questionnaires are the basic source.

 

Measurement of responses

In the questionnaires the responses were rated as: strongly agreed, agreed, don’t know, not agreed and strongly disagreed. 1 point for strongly disagree, 2 for disagree, 3 for Neutral, 4 for Agree and 5 for Strongly Agree.

 

Validity and reliability

The data was collected and analyzed unbiasedly for the confirmation of the validity and reliability of the research.

 

Descriptive analysis

To analyze the data correlation analysis and regression analysis was done. The descriptive analyses of profiles consisted of respondent’s age, sex, nationality, the job, experience in international market business. The descriptive analyses involved were a statistical test for frequency.

 

Correlation analysis

To determine the relation between two variables dependent and independent this analysis was done. That showed +1 value confirming the positive correlation between variables that were seen to be affecting foreign direct investment. The import and export both were correlated. The +1 result shows positive relation between both FDI and import, FDI and export and GDP and FDI.

 

Multiple regression analysis

The multiple regressions were applied to analyze that the independent variables affect the dependent variable. The analysis also determined which factor affects the dependent variable the most. The independent factors, DGP, import and export all cast positive impact on FDI collectively.

Chapter 4

4.1 Presentation of data

In this research the data is collected in a period of time. all the variables, either dependent or independent are collected in a same time series to make sure that the data is accurate and accordingly. All this data helped us in finding the strength of our hypothesis. For making the data more appropriate it was collected from the archives of nearly 20 years time span, in which we included our different independent variables that casted impact on the foregin direct investmen. The variables were thoroughly studied along with their impact on the foregin direct investment. The previous data and the current studies confirmed the impact of our selected variables over the foregin direct investment.  Our independent variables were inflation, market size, trade openness and human capital. In the process of data collection and interpretation the independent variables seem to be impacting the foregin direct investment. The rate of impact was changing according to the political stability and terrorism and some other factors.  In the process of data analysis different tools were used like, Augmented Dickey-Fuller test. And The variables were given the same weight.

4.2 Analysis of data

Table 4.1   Market size
	t-Statistic	Prob.*
Augmented Dickey-Fuller test statistic	-3.907649	0.0372
Test critical values:               1% level	-4.667883
5% level	-3.733200
10% level	-3.310349

 

The variable is stationary and is at stationary level with linear trend trend. The probability is 0.0376.

 

Table 4.1   Trade openness
	t-Statistic	Prob.*
Augmented Dickey-Fuller test statistic	-3.907649	0.0372
Test critical values:               1% level	-4.667883
5% level	-3.733200
10% level	-3.310349

The variable is stationary and is at stationary level with linear trend trend. The probability is 0.0372.

 

Table 4.1   Literacy Rate
	t-Statistic	Prob.*
Augmented Dickey-Fuller test statistic	-3.907649	0.0372
Test critical values:               1% level	-4.667883
5% level	-3.733200
10% level	-3.310349

 

 

The variable is stationary and is at stationary level with linear trend trend. The probability is 0.0372.

 

 

 

Table 4.1   Inflation rate
	t-Statistic	Prob.*
Augmented Dickey-Fuller test statistic	-3.907649	0.0372
Test critical values:               1% level	-4.667883
5% level	-3.733200
10% level	-3.310349

 

The variable is stationary and is at stationary level with linear trend trend. The probability is 0.0372.

 

 

 

 

Table 4.2               Human Capital
	t-Statistic		Prob.*
Augmented Dickey-Fuller test statistic	-4.942223		0.0042
Test critical values:                            1% level	-4.498307
5% level	-3.658446
10% level	-3.268973

 

 

 

The variable is stationary and is at stationary level with linear trend trend. The probability is 0.042..

 

Table 4.2   FDI : Foreign Direct Investment
	t-Statistic	Prob.*
Augmented Dickey-Fuller test statistic	-4.942223	0.0042
Test critical values:                            1% level	-4.498307
5% level	-3.658446
10% level	-3.268973

 

The variable is stationary and is at stationary level with linear trend trend. The probability is 0.0042..

 

 

table 4.3

Variable	Number of Cases	Coefficient	significance	Sign
GDP. 88 -98	110	-0.082	.402	NO
GDP, 1998	122	-0.022	.751	YES
POPULATION 98	122	-0.009	.930	YES
POPULATION 98	122	-.187	.041	YES
GDP STANDARD DEVIATION 98-99	110	-.110	.350	NO
EXCHANGE RATE 98	99	-.031	.758	NO
UNEMPLOYMENT	16	-.319	.000	YES YES
LITERACY	88	-.519	.667	YES
RATE OF TECHNICIAN IN POPULATION	49	-.268	.450	YES
AVERAGE INFLATION	80	-.245	.400	YES

 

4.3 representation of data

 

Before running last regression analysis, it is imperative to survey the key thought of each independent element with the dependent variable. A bivariate test is useful in light of the fact that it gives supporting evidence of the fundamental course of each independent  variable’s effect on the dependent variable. As a result, as far as possible the natural effects that would appear in regression analysis. table 4.3 gives

the essential explaining estimations right after running a bivariate test with each dependent variable. As table 4.3 shows, the realistic estimations generally support the previous hypotheses that were presented before in the audit. A staggering larger piece of the elements responded as expected. Seven out of the ten variables have the right sign and six out of the ten are basic at the .10 level.Regardless, several obstacles present themselves. Three of the variables didn’t have the sign that was ordinary

 

(Typical GDP 88-97, GDP Growth Standard Deviation 88-97 and Exchange Rate Standard Deviation 88-97). Yet the bivariate testing is in a manner of speaking

a crucial assessment to a further evolved verifiable contraption, the numbers should address the fundamental directional association between the dependent and independent variables. If the example happens right after running various regression tests, an undertaking to explain the astounding heading of these elements will be made.

In addition, an enormous number of the variables are not truly basic. Though this is alarming as per a verifiable perspective, it in like manner gives an intriguing principal finding. Perhaps the really tremendous free factors play an enlightening position in explaining levels of FDI while the others don’t. The going with regression results

give a more complete depiction of the association among FDI and the other independent factors. These three backslide tests take a gander at both

the course of effect and size of effect of the independent elements on FDI. The issue of significance was not completely settled with regression analysis , yet the directional issue has been imperceptibly moderated. As shown by table 4.3, obliviousness rate (97),

ordinary GDP advancement (88-97), number of experts per 1 million (95) and metropolitan people (97)were all basic. Resulting to running additional backslide tests, obliviousness rate remained uncommonly sigBefore running last backslide tests, it is

basic to research the fundamental thought of each independent variable with the dependent variable. A bivariate test is useful in light of the fact that it gives supporting

evidence of the fundamental heading of each free variable’s effect on the dependent variable. As a result, as far as possible the shrewd effects that would appear in a backslide test. table 4.3 gives the key illuminating bits of knowledge resulting in running a bivariate test with each dependent variable. As table 4.3 shows, the illuminating bits of knowledge generally support the previous hypotheses that were presented before in the survey. An awesome larger piece of the variables responded as expected. Seven out of the ten elements have the right sign and six out of the ten are enormous at the.10 level. Nevertheless, two or three hindrances present themselves. Three of the elements didn’t have the sign that was typical (Ordinary GDP 88-97, GDP Growth Standard Deviation 88-97 and Exchange Rate Standard Deviation 88-97). But the bivariate testing is so to speak a groundwork assessment to a further evolved genuine device, the numbers should address the central directional association between the dependent and free factors. In the event that the example. After running various backslide tests, an undertaking to explain the surprising course of these variables will be made.

Besides, a significant parcel of the variables are not really tremendous. But this is disturbing as indicated by a quantifiable perspective, it similarly gives an

charming starter finding. Perhaps the quantifiably basic free factors play an

coherent occupation in explaining levels of FDI while the others don’t. The going with regression results in Tables 4, 5, and 6 give a more complete depiction of the association among FDI and the other free factors. These three backslide tests check out both the heading of effect and size of effect of the free factors on FDI. The issue of significance was not completely settled with regression examination, yet the directional issue has been hardly alleviated. As shown by table 4.3, obliviousness rate (97),

ordinary GDP advancement (88-97), number of specialists per 1 million (95) and metropolitan people (97) were all basic. Right after running additional backslide tests, absence of training rate remained particularly tremendous while various variables were not dependably enormous.

As communicated already, the size of a variable’s effect is not altogether permanently established by this model. Resulting to differentiating the coefficients inside each of the

backslide tests, one clear example is self-evident: the tutoring of a country is a huge variable in the interest of MNCs FDI. Obliviousness of a nation, the analysis shows dependably addressed a great deal of the distinction of FDI. Not solely was the absence of training variable dependably tremendous, yet it furthermore dependably addressed a huge piece of the vacillation of the subordinate variable. This is huge considering the way that, when sorting out which areas to zero in on to attract FDI, LDCs ought to at first choose all and almost certainly teach their general population. Since the absence of schooling speed of a LDC addresses a huge piece of the variance in levels of FDI, a game plan that builds up the guidance of the LDC should be the most raised need.

 

 

 

Analysis

In this chapter the complete discussion will be done on the analysis of the results that are gathered by the data and the facts that are benignly collected related to our research questions. Moreover, the details about the factors that play an important  role in the flow of foregin direct investment in a country shall be discussed. In this research we can conclude on the basis of our data collection and analysis process that the foregin direct investment depends upon multiple factors in any country. How much foregin direct investment a country receives directly and indirectly depends upon its economical and political conditions. The general group behavior of the people of the nation and the important past experiences also make up an outline of the expectations of the investors that want or not want to invest in that country. The recent highlighted and important events held or created in a country make its reputation and overview to the outer world, that gives the investors a chance to make their decision about investing in that country. The main factors that are affecting the foregin direct investment are as follows.

1. Rate of wages in the country

A huge inspiration for a company to invest in abroad countries is to produce their products at low cost. Accepting that typical wages in the US are $10 an hour, but $1 an hour in the Indian sub-central area, costs can be reduced by re-appropriating creation. To this end various Western firms have placed assets into fabric assembling plants in the Indian sub-central area.

Regardless, wage rates alone don’t choose FDI, countries with significant compensation rates can regardless attract higher tech adventure. A firm may be reluctant to place assets into Sub-Saharan Africa since low wages are counterbalanced by various drawbacks, for instance, nonappearance of structure and transport joins.

2. Work capacities

A couple of productions require higher skilled workers, for example medications and electronic devices. Thus, multinationals will place assets into those countries with a blend of low wages, yet high work productivity and capacities. For example, India, Pakistan and other easteren countries have attracted immense interest in call centers, considering the way that a significant level of the general population impart in English, but remuneration are low. This makes it a charming spot for reconsidering and thus attracts investors.

3. Taxa rates and regulations in the country

Huge multinationals, for instance, Apple, Google and Microsoft have attempted to place assets into countries with lower tax charging rates. For example, Ireland has been successful in attracting adventure from Google and Microsoft. In all honesty, it has been questionable considering the way that Google has endeavored to channel all benefits through Ireland, regardless of having undertakings in each and every European country.

4. Transport and structure

An indispensable variable in the follow of investment  are the vehicle costs and levels of establishment. A country may have low work costs, yet if there is a high cost of transportation  to get the product onto the world market, this is a drawback. Countries with induction to the sea are at an advantage to landlocked countries, who will have more noteworthy costs to ship stock. The opportunities in the countries of good transportation and channels of transportation are necessary for attracting foregoing investment.

5. Size of economy/potential for advancement

The investors are more attracted to sell their product within the country they are making  an investment in. Thus, the size of the general population and degree for financial improvement will be huge for attracting investment. For example, Eastern European countries, with a tremendous number of people, for instance Poland offers scope for new business areas. This may attract new vehicle firms, for instance Volkswagen, Fiat to put and manufacture plants in Poland to propose to the creating buyer class. Little countries may be in a difficult situation since it doesn’t justify contributing for a few people. China will be a goal for new pursuit as the late emerging Chinese middle class could have an astoundingly strong interest for the products of international leveled companies.

6. Political strength/property honors

Foregin direct investment is itself a risk for the investors. Countries with a questionable political situation, will be a huge disincentive. Similarly, the financial crisis can put investor’s interest down. For example, the new Russian money related crisis, together with monetary endorsements, will be a primary thought to put new investment down. This is one inspiration driving why past Communist countries in the East rush to join the European Union. The EU is considered an indication of political and monetary stability, which upholds the new investment.

Associated with political adequacy is the level of pollution and trust in associations, especially lawfulness and the level of harmony and legality in the country are also important factors.

7.Raw material and other Products

One legitimization behind new foregin investment is the presence of items. This has been a huge avocation behind the advancement in FDI inside Africa – as often as possible by Chinese firms looking for a protected supply of things.

8. Exchange rates

A weak change in standard in the host country can attract more FDI in light of the fact that it will be more affordable for the investors to purchase assets

9. Gathering impacts

New firms oftentimes are attracted to place assets into equivalent locales to existing FDI. The clarification is that they can benefit from outside economies of scale – improvement of organization adventures and transport joins. Also, there will be more critical assurance to place assets into areas with a good previous experience. Thus, a couple of countries can make a hopeful example of attracting investment and thereafter these fundamental endeavors attract extra. It is moreover on occasion known as an agglomeration sway.

10. Induction to smoothen out trade areas

A gigantic part for firms placing assets into Europe is induction to EU Single Market, which is a liberation district yet moreover has incredibly low non-demand limits because of harmonization of rules,  and free movement of people.

The factors like GDP, imports and exports of the country also have a great impact on the attracting the foregin investors to create business in a country. A good GDP highlights a good environment for a new firm to expand their business in the country. The imports and exports of a country also give the investors an idea about the interest, skills and culture of the country.

THE IMPORTANCE OF FOREIGN INVESTMENT IN THE KINGDOM OF BAHRAIN

Within Kingdom of Bahrain, the capital market is positive and generally stable. When it relates to recruiting foreign direct investment and industry, Bahrain retains a business-friendly attitude and a flexible approach.Bahrain desires the private market to play a much bigger role in the economy, which is currently controlled by government firms. The Government of Bahrain (GOB) is mainly concentrating on attracting foreign investors (FDI) on the industrial, logistic, ICT, banking sectors, and tourism sectors.

In 2020, Bahrain’s entire FDI stock was valued BD 11.537 billion (USD 30.683 billion). Inflow of fdi fell from BD 603 million (USD 1.6 billion) in 2018 to BD 355 million (USD 942 million) in 2019 and BD 333 million (USD 885 million) in 2020.The Covid-19 pandemic, coupled with the global fall in oil prices in 2020, hindered the GOB’s attempts to boost income and cut government spending. To alleviate the economic effect of the epidemic, Bahrain implemented a BD 4.3 billion (USD 11.4 billion) monetary assistance package in April 2020, equal to 29 percent of GDP. The product’s main attributes were maintained until 2021.

The GOB launched Bahrain FinTech Bay in 2018, issued techniques that help regulations, and created the USD 100 million Al Waha venture capital fund for Bahrain investments and the USD 100 million groundwater to support startup development to strengthen Bahrain’s status as a company major hub.Bahraini encourages new economic organizations to be controlled solely by outsiders, as well as the establishment of offices located or branch of foreign companies without the participation of Bahrain sponsorship or partner companies. Tourist activities, sporting event planning, mining & construction, property investment, pumping stations, water delivery activities, and crop cultivation and propagation all were added to a list of areas wherein foreign are permitted to own 100 percent of a business in 2017.

Foreign property restrictions in the oil and gas sector was relaxed by the GOB in May 2019, allowing 100 % foreign ownership in oil and gas production operations under certain conditions.Although the GOB’s comprehensive, regulations government contracting system, American companies sometimes argue to go to a disadvantage in comparison to businesses. Several departments force employers to pre-qualify before bidding on a tender, making the company with no previous experience in Bahraini ineligible to participate for major contracts.On January 12, 2021, the US Secretary of Business and Bahrain’s Ministry of Industry, Trade, and Tourist memorandum of Understanding to high performance trade ties by creating a US Economic Area in Bahrain.

Openness To, and Restrictions Upon, Foreign Investment

Foreign investment is welcomed by the GOB, which actively strives to attract foreign investors and firms. Increasing foreign direct investment (FDI) is a primary objective for the government. The GOB allows a company or branch office to be owned entirely by foreigners without the need for a sponsor or a local business partner. Corporate income, personal income, wealth, capital gains, withholding, and death/inheritance are all exempt from taxation under the GOB. Except for income earned by enterprises in the oil and gas sector, where profits are taxed at a rate of 46 percent, there are no limits on capital, profits, or dividends being repatriated. The Bahrain Economic Development Board (EDB), which is responsible for encouraging foreign direct investment in Bahrain, focuses on attracting FDI to the manufacturing, logistics, information and communication technology (ICT), financial services, and tourist and leisure sectors.

Limits on Foreign Control and Right to Private Ownership and Establishment

 

The GOB allows international and domestic private entities to set up and own businesses and engage in any type of remunerative activity. Foreign control, as well as the ability to own and start a business, are all subject to modest restrictions under the GOB. Press and publishing, Islamic pilgrimage, clearing offices, and workforce agencies are among the businesses confined to Bahraini ownership, according to the Ministry of Industry, Commerce, and Tourism (MoICT). The FTA between the United States and Bahrain covers all activities in which the two governments limit foreign ownership.

 

Business Facilitation

The World Bank’s overall Ease of Doing Business Indicator in 2020 placed Bahrain 43rd out of 190 countries.

The CBB’s regulatory sandbox allows local and international FinTech firms and digitally focused financial institutions to test innovative solutions in a regulated environment, with successful enterprises being able to gain licensure after successful product application.Most business owners must get licences from the following entities in order to conduct their operations, in addition to getting main approval to register a company:

• Ministry of Information and Communications Technologies • Electricity and Water Authority • Municipality where their business will be located • Labour Market Regulatory Authority • General Organization for Social Insurance • National Bureau of Revenue (Mandatory if the business revenue exceeds BD 37,500)

 

The GOB offers industrial lands at reduced rental rates, customs duty exemptions for industrial and manufacturing projects, including imports of raw materials, plant machinery equipment, and spare parts, and a five-year exemption from the “Bahrainization” recruitment restriction to encourage foreign investment in Bahrain’s targeted sectors and investment zones.

Legal Regime

Transparency of the Regulatory System

 

To improve the country’s economic eco-system, the GOB issued competition laws, protection of personal data laws, banking laws, and healthcare insurance laws in 2018. The Law of Commerce (Legislative Decree No. 7, enacted in 1987) deals with the issue of unfair competition and prohibits actions that might harm competition. Companies are also prohibited from engaging in anti-competitive behaviour or using anti-competitive tactics to attract competitors’ customers. Bahrain lacks an established competition authority and has yet to enact comprehensive anti-monopoly legislation or establish an impartial anti-corruption body.

 

International Regulatory Considerations

Bahrain has promised, as a GCC member, to enforce GCC standards and regulations where they exist and not to enact domestic legislation that conflict with GCC-wide standards and regulations. Where domestic or GCC standards have not been set, the GOB will apply international norms.

Legal System and Judicial Independence

Bahrain is a sovereign, independent Arab Muslim state, according to its constitution. Despite the fact that Article 2 of the Constitution declares Islamic Sharia (Islamic law) to be the primary source of legislation, general concerns and private transactions are mostly controlled by rules drawn from international law. Bahrain has three sorts of courts: civil, criminal, and Sharia (family) courts. Lower courts, courts of appeal, and the Kingdom’s highest appellate court, the Court of Cassation, hear a wide range of civil, criminal, and familial disputes. All administrative, commercial, and civil cases, as well as disputes about non-Muslims’ personal status, are dealt with the civil courts. Personal status issues, such as marriage, divorce, custody, and adoption, are dealt with primarily by family courts.Industrial Policies

Investment Incentives

To entice FDI, the GOB provides a number of incentives. Bahrain EDB, Bahrain Logistics Zone (BLZ), Bahrain Development Bank (BDB), Bahrain International Investment Park (BIIP), and labor market fund Tamkeen all offer incentives to attract foreign direct investment. Financial awards, exemption from import charges on raw materials and equipment, and duty-free access to other GCC markets for Bahrain-made products are only a few examples of incentives.

Foreign Trade Zones/Free Ports/Trade Facilitation

Bahrain’s main commercial seaport, Khalifa bin Salman Port, offers a duty-free transit zone for equipment and machinery imports. The GOB has created two major industrial zones, one in Sitra and the other in Hidd. The Hidd site, dubbed BIIP, is located next to the BLZ logistics zone. In these zones, foreign-owned businesses enjoy the same investment options as Bahraini businesses.

Monitoring plan

As implementation advances, monitoring and evaluation (ME) arrangements allow SCF partners to compare actual progress to planned results, identify lessons learned, and alter results and methods to respond to changes in socioeconomic conditions and evolving priorities. The outcome indicators presented in the results matrix will be used to monitor progress. At the national priority level, the partner will monitor changes in nationalised SDG indicators and targets. On the basis of routine monitoring and reporting by Results Groups, the SC and UNCT bear major responsibility for assessing performance (RG).

Major risks:

The COVID-19 epidemic is putting a lot of pressure on health systems and services. The response to a pandemic must be carried out while sustaining key health services and without jeopardizing the system’s ability to function. PPE must be prioritized for health-care professionals. Some groups, particularly expatriate workers, are more vulnerable to infection as a result of their working and living conditions, and may not have equal access to timely, accurate information about infection risks and high-quality preventive and curative health services, despite significant efforts by the government.

The risk management strategy involves:

Cross-sectoral policy and programme coordination that is stronger and more sustainable, led by the government-UN Steering Committee for the SCF. This will aid in the maintenance of ties between the anticipated SCF outcomes and government policy and programmes, as well as ensuring that data and evidence are used to impact delivery.Efforts to put existing government policies, plans, and service delivery frameworks into practise at the local level, as well as to develop new capacities for effective, cross-sectoral approaches. Volunteers and volunteer groups will be involved in planning and service delivery to ensure that the needs of community groups are met.

 

Chapter 5

 

Discussion

Then foregin direct investment is a sign to pave the way towards more development of a country. In the developing countries it creates more ways for production and exports as well as foregin direct investment elevated the standard of life of the natives of the country where it happens. As the foregin direct investment creates production firms so it increase the opportunities of employment for the people of the country. The jobs are created for all types of people like laborers, managers, engineers and other related professionals. Mostly the higher management is from the country from where the investment has been made but the other staff is surely from the native land. Foraging direct investment depends upon conditions of the country. The political conditions that make the country a safe place are necessarily seen and considered by the investors before anything. Because the rapid change in political climate can create sudden changes in tax laws, property regulations, import and export business and many other aspects according to the political interest. When a company is intended to make any foraging investment, there are some concerns they are following, that are their need to extend their business and making international recognition and for this purpose they are seeing major opportunities in different countries, so the countries that need the foregin investors to invest there need to maintain their standards that can attract the investors. Level of transportation in general and for the product to be sent for sale should be in good condition for attracting the investors. The GDP of the country indicated the skillfulness and interest in the work for the whole nation. So a good GDP is also important for the foregin direct investment. In the developing countries the foregin direct investment requires further work. In Bahrain the level of GDP is already good and there are good facilities related to infrastructure and availability of raw material so the market is attracting the foregin investors to invest here. There are many brands and companies in Bahrain that are owned by foreigners, like Bahrain cinema company, united gulf holding company, seef properties and tarco group. These foregin organizations provide a good history of progression in Bahrain that can attract more foregin direct investment. To get more investment from forgin Bahrain needs to produce more skillful people in the field of technology, engineering and finance. The provision of good infrastructure and communication systems also attracts foregin direct investment. The market conditions that can predict the sale of a specific product also gives a good estimate of the business development about the investment. All these factors can predict that upto which level a country will get foregin direct investment.

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