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Analyzing the Impact of Foreign Direct Investment, Energy Consumption on Services Exports, and Growth of the Services Sector: Evidence from SAARC Countries

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A Correction to this article was published on 18 October 2023

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Abstract

This paper investigates the impact of services FDI inflows on service exports in selected South Asian countries by employing panel data techniques from 2000 to 2020. For robustness of panel data analyses, the study uses second-generation approach and a heterogeneous procedure for panel data for Southern Asia from 2000 to 2020. The empirical investigation of long-term impacts driven by augmented mean group (AMG), common correlated effects mean group (CCEMG), and mean group (MG) assessors further supports the significant and positive impact of FDI, economic growth, and energy consumption. The paper discovered robust evidence that FDI inflows in the service sector significantly contribute to the increase in services exports in the South Asian region. The findings of the paper have important policy implication for boosting exports and addressing the problem of perennial trade deficit in the South Asian region. The results reveal that adoption of investment liberalization policies is essential for South Asian countries to attract services sector FDI to enhance the services exports and to move toward the path of economic stability.

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Fig. 1

Source: Authors calculations from UNCTAD

Fig. 2

Source: WDI

Fig. 3

Source: WDI

Fig. 4
Fig. 5

Source: author’s calculation from UNCTAD

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Data Availability

The data is available on request from corresponding author.

Change history

Notes

  1. GATS provides four mode of trade in services: mode 1, cross-border supply, services supplied from one nation to another (Like, International phone calls); mode 2, consumption abroad, firms or consumers making use of a service in another nation (Like tourism); mode 3, commercial presence, a foreign enterprises setting up branches or subsidiaries to provide services in another nation (like foreign banks) and mode 4, presence of natural persons, persons traveling from their own nation to supply services in another (like consultants or fashion models).

  2. In 1970, FDI in services sector represented a quarter of global FDI stock; in 1990, it rose almost to half; and in 2002, the share of services FDI inglobal FDI stock increased to 60% (UNCTAD, 2004).

  3. The authors have complied sectoral composition of export, namely primary, manufacturing, and services exports of the South Asian region. Sectoral trends unearth that manufacturing exports as a percent of total exports in South Asian region is still high but the share of services exports gradually rose and has registered strong growth. The compiled data is available on request.

  4. South Asian countries demonstrate the southern region of Asia; it is surrounded by the fastest emerging developing region with an average yearly growth of 6.7%, which contribute a quarter of the world ‘s population.

  5. During seventies and eighties, South Asia has practiced sluggish growth rates which tends to undertook reform processes in the region and opened up their economies.

  6. SFDI data is collected from BOI (Bangladesh) and Survey Report (2016) of Bangladesh Bank; Fact Sheet on FDI, Department of Industrial Policy and Promotion, India; Department of Industries Planning, Monitoring & Evaluation Division Tripureswore, Nepal; State Bank of Pakistan Annual reports; BOI (Sri Lanka) and Dushni and Thennakoon (2009).

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Authors and Affiliations

  1. Business School, Jiangsu Open University, Nanjing, China

    Yongrong Xin

  2. Department of Business Administration, University of Poonch Rawalakot, Rawalakot, Pakistan

    Aftab Hussain Tabasam

  3. School of Economics, Beijing Technology and Business University, Beijing, 100048, China

    Zhenling Chen

  4. Department of Business Administration, Faculty of Management Sciences, ILMA University, 75190, Karachi, Pakistan

    Aysha Zamir

  5. Department: Research Institute (IC-UAC), Universidad Andina del Cusco, Cusco, Peru

    Carlos Samuel Ramos-Meza

  6. Institute for Carbon Peak and Neutrality, Beijing Wuzi University, Beijing, 101149, China

    Zhenling Chen

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Xin, Y., Tabasam, A.H., Chen, Z. et al. Analyzing the Impact of Foreign Direct Investment, Energy Consumption on Services Exports, and Growth of the Services Sector: Evidence from SAARC Countries. J Knowl Econ (2023). https://doi.org/10.1007/s13132-023-01347-0

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