Baseline Profitability Index Analysis on the Country’s Attractiveness to Foreign Investment

Elvira E. Ongy, Arthur A. Varron, Ernesto F. Bulayog

Abstract


This study asserted that a country’s attractiveness to foreign investments is affected by different factors which include corruption level, physical security, capital control, economic growth, expropriation by government, exploitation by local partners, financial stability, and exchange rate. It is based on the concept of Baseline Profitability Index created by Prof. Daniel Altman in 2013. Specifically, this study mainly focused on determining the practices and local policies employed by the countries that are highly attractive to foreign investors. These policies and practices were used as the basis in defining recommendations for policy interventions to address the issues and predicaments of those that lagged behind drawing in more foreign investments. It showed that the country’s attractiveness has significant correlation with corruption, physical security, expropriation, and capital control. Cross-correlation among the factors also demonstrates that corruption, physical security, capital control, economic growth, and government expropriation are significantly interrelated with each other while exchange rate has a significant relationship only with economic growth. Firm’s ability in some countries to evade the capital control was widespread which resulted in increased corruption and lowered economic efficiency. The insubstantial rule of law remains a powerful deterrent to improving economic efficiency. Countries that have oppressive legal and regulatory schemes and very low protection on property rights would be less likely to attract more foreign investors. Thus, countries must recognize the importance and real essence of foreign investment as it helps in building global competitiveness of the economy as a source of newly developed technologies, capital, and management expertise.


Keywords


Baseline profitability index; Foreign investments; Global competitiveness; Foreign investment attractiveness

Full Text:

JEHRD 006

References


Abala, D. (2014). Foreign Direct Investment and Economic Growth: An Empirical Analysis of Kenyan Data.

Altman, D. (2015, October 31). Where to Invest Around the World, 2015 Edition.

Altman, D. (2013, October 10). Introducing the Baseline Profitability Index.

Bureau of Economic and Investment Affairs. (2013). Investment Climate Statement.

Calderon, C. & Didier, T. (n.d.). Will FDI be Resilient in this Crisis?

Carnegie Endowment. (2014). Corruption:The Unrecognized Threat to International Security.

Chinn, M. & Ito, H. (2013). The Chinn -Ito Index.

Dabour, N. (2000). The Role of Foreign Direct Investment in Development and Growth of OIC Members.

Defyimpossible. (n.d.). Money Words: Twelve Terms that Will Help You Talk Money Like a Pro!

Economy Watch. (2015). Retrieved from http://www. economywatch. com/EU-Philippine Business Network (EPBN). (2015). Why is Philippines lagging in the FD?

Forbes. (2016). Retrieved from http:// www.forbes. com/ places/ hong -kong/Foreign Policy Magazine. (2015). Retrieved from www. foreign policy. com

Globalization101. ( 2015). Positive Effects of Foreign Investment. Retrieved from http://www. globalization101. org/ positive-effects -of -foreign -investment/

Gupta, S. (2012). Income Inequality and Fiscal Policy. Retrieved from http://imf.org/ external/ pubs/ ft/ sdn/ 2012/sdn1208.pdf

International Monetary Fund (IMF). (2015). Global Financial Stability Report. Retrieved from http:// www. imf. org/external/ pubs/ ft/ gfsr/ 2015/ 01/ pdf/text.pdf

International Property Rights Index (IPRI). (2015). Retrieved from http:// international property rights index. org/

Kendall. (n.d.) Preservation Strategies. Retrieved from http:// kendallcapital. com/preservation -strategies/

Mallampally, P. & Sauvant, C. (1999). Foreign Direct Investment in Developing Countries, 36 (1).

McGraw Hill Financial Inc. (2015). Retrieved from http:// investor .mhfi. com/ phoenix.zhtml? c= 96562 &p=irol -news Article&ID= 1711100

Oling, V. (n.d.). African Economic Outlook. Retrieved from http:// www. african economic outlook. org/ en/ country- notes/east- africa/ uganda/

OECD. (2014). OECD ECONOMIC SURVEYS: SPAIN OECD 2014.Retrieved

from https:// www. oecd. org/ eco/surveys/ Spain -Overview -2014. pdf.

Rodrik, D. (2008). The Real Exchange Rate and Economic Growth, Brookings Paperson Economic Activity, Harvard Univeristy.

Salam, F. (2010). Analysis of Sweden as an Attractive Country for Investment. Retrieved from http:// www. hrmars. com/admin/ pics/ 44. pdf

Sanderatne, N. (2011). The Importance of FDI, Sunday Times. Retrieved from www. sundaytimes. lk/ 110529/ Columns/eco.htm

TechTarget. (2015). Retrieved from http://search security. tech target. com/definition/ physical -security

The Heritage Foundation. (2016). Retrieved from http:// www. heritage. org/ index/

Trade Chakra. (2008). Foreign Investment in Singapore. Retrieved from http://www.tradechakra. com/ economy/singapore/ foreign- investment- insingapore-63. php

Transparency International. (2015). Corruption Perception Index (CPI).

Retrieved from http:// www. transparency.org/ cpi2012/

UNCTAD. (2013). FDI inflows, by region and economy, 1990-2014. Reteived from http:// unctad. org/ en/ Pages/DIAE/ World%20 Investment %20 Report/Annex- Tables. aspx

UNCTAD. (2015). FDI inflows, by region and economy, 1990-2014. Retrieved from http:// unctad. org/ en/ Pages/ DIAE/World %20 Investment %20 Report/Annex-

US Department of State. (2015). Retrieved from https:// www.s tate. gov/

Viswanathan, B. (2015). How did India become a top destination for foreign investments (as of 2015). Retrieved from https:// www. quora. com/ How- did- Indiabecome-a-t op -destination -for-foreigninvestments-

as- of- 2015

World Bank Group. (2015). Bangladesh Development Update: Economy Moving Forward despite Internal and External Challenges. Retrieved from http:// www.worldbank. org/ en/ country/ bangladesh/publication/bangladesh -development-update -economy -moving -forward-despite -challenges

World Economic Journal. (2013). Retrieved from http:// www. world -economicsjournal.com/


Refbacks

  • There are currently no refbacks.