Question

what are areas of further study that should be conducted in investment for a pacific country ?

Answer 1

PACIFIC COUNTRIES :

   Pacific countries include Commonwealth of the Northern Mariana Islands, the Federated States of Micronesia, Fiji, French Polynesia, Kiribati, the Marshall Islands, Nauru, New Caledonia, New Zealand, Palau, Solomon Islands, Tonga, Tuvalu, Vanuatu, and Wallis and Futuna.

LOW PER CAPITA INCOME COUNTRIES :

Comparatively, the net national income per capita in Nepal was 777.6 U.S dollars in 2017.
Net national income per capita in selected Asia Pacific countries in 2017 (in 1,000 U.S. dollars)
Net national income per capita in thousand U.S. dollars

OPPURTUNITIES AVAILABLE :

1. Participation in regional structures such as the Pacific Islands Forum and the biennial Meeting of Ministers of Health for the Pacific Island Countries
2. Increasing recognition by governments and stakeholders in the role of health in development
3. Most countries are implementing public sector reforms supported by stakeholders
4. Growing commitment to meeting the Millennium Development
5. Goals, with good progress to date by most countries.

DATAS FROM WORLD BANK

• Inflows of FDI to selected Pacific countries
• Pacific country/country group Net inflows of FDI to GDP (%)
• 1980 – 1989 1990 – 1999 2000 - 2009
• Fiji 2.13 3.24 5.42
• Kiribati 0.14 9.42 11.41
• Papua New Guinea 3.98 3.65 1.71
• Samoa 0.14 3.09 0.87
• Solomon Islands 1.33 2.92 5.72
• Tonga 0.13 0.55 2.77
• Vanuatu 5.33 11.34 6.09
• Pacific Average 1.88 4.89 4.86
• Low and Middle Income Countries 0.58 1.94 2.79
• World 0.67 1.49 2.86

Variable Description Source Growth Growth in real GDP per capita World Bank (2011) FDI FDI inflows as a percentage of host country GDP World Bank (2011) Initial GDP per capita Log level of GDP per capita (constant US$) World Bank (2011) Human capital Secondary school enrolment rate (Net) World Bank (2011) Imports Imports of goods and services as a percentage of GDP World Bank (2011) Exports Exports of goods and services as a percentage of GDP World Bank (2011) Inflation Annual growth rate of the GDP deflator shows World Bank (2011) Invetment Gross domestic investment as a percentage of GDP World Bank (2011) Free CV Variable taking the value of 1 for countries with an average index score of between 1 and 2.5 for political rights and civil liberties The coefficient of variation for FDI defined as its standard deviation divided by its mean Freedom House (2011) Authors calculations Latitude Distance from the equator CIA (2011) Longitude Distance from Greenwich prime meridian CIA (2011) Variable mean sd Max min Growth 1.889 3.556 31.236 -18.645 FDI 3.156 5.368 61.976 -20.921 Initial GDP per capita 7.584 1.541 10.626 4.390 Imports 42.510 22.588 195.084 5.081 Exports 36.161 21.956 204.975 4.241 Human capital 61.262 33.188 155.579 0.374 Inflation 3.042 0.771 8.860 1.184 Domestic Investment 22.184 7.995 83.043 3.184 CV 100.979 56.997 391.223 -139.618

DETAILED STUDY

Pacific countries experience volatile levels of FDI in addition to volatile growth rates, potentially hampering FDI’s impact on economic growth. To capture this volatility, the Coefficient of Variation (CV) of FDI is employed as an explanatory variable. The coefficient of variation is a statistical measure of the dispersion in a series around the mean. It is calculated as the ratio of the standard deviation to the arithmetic mean of variable. Finally, latitude and longitude variables are included in some regressions since economic growth rates are often found to vary across geographic areas. Full details of data sources and definitions are reported in Table A1 of the appendix. Summary statistics for the variables are provided in Table A2.

Scatter plot of Economic Growth

There are number of explanations to why the impact of FDI to the Pacific is lower (on average) than in other parts of the world. One explanation is that a lot of FDI has been concentrated in the extractive industries with such investments being plagued with allegations of corruption, disputes with local landowners and environmental damage. Profits from these investments have been repatriated overseas rather than re-invested in the Pacific. FDI might also have crowded out domestic investment and employment in the region. Another explanation is that the returns to FDI in the Pacific are lower due to factors that reduce productivity and profitability of foreign investments in Pacific countries. These factors include a high cost and low availability of skilled labour, a great distance to major markets as well as unfavourable business environments.

CONCLUSION:

The economic growth record of the Pacific region been disappointing and partially a result of this, poverty in the region is higher and progress towards the Millennium Development Goals (MDGs) has been slow and in some cases non-existent. With their limited resource bases, small domestic markets and lack of economies of scale, Pacific countries are strongly reliant on assistance from some countries in the forms of foreign aid, trade, access to labour markets and FDI. This paper finds that the growth return from FDI to the region has (on average) been very small (although positive).10 per cent increase in ratio of FDI to host GDP is associated with higher growth of about two per cent in host countries on average but just 0.1 to 0.4 per cent in case of the Pacific...