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Foreign Direct Investment (FDI) and Forest Land: A Sectoral Investigation

Updated: 3 hours ago

Latest RESEARCH ARTICLE on the effects of sectoral FDI inflows on the rates of change of forest land and the ecological footprint of economic activity measured in forest land by Dr. Nguyễn Phúc Cảnh, Senior Researcher at HAPRI.

FDI and Forrest land

The paper examines the impact of sectoral foreign direct investment (FDI) inflows on forest land changes and the ecological footprint of economic activities in forests. It tests the “FDI ecological halo” hypothesis across nine FDI sectors using a global dataset and a GMM econometric model. The research aims to determine the influence of sectoral FDI on deforestation and the forest ecological footprint, analyzing data from 85 countries between 1991 and 2020, while controlling for economic and demographic factors.

The findings indicate that FDI in sectors such as agriculture, mining, manufacturing, and construction generally exacerbates the depletion of forest land. This underscores the pressing need for stringent regulations to mitigate the environmental damage caused by these industries. The study’s evidence suggests that without careful oversight, investments in these sectors could significantly increase the ecological footprint, particularly in forested areas.


Conversely, the impact of services sector FDI paints a more varied picture. While trade services FDI appears detrimental to forest environments, other service sectors like communications, financial, and transport FDI demonstrate potential benefits, supporting the “FDI ecological halo” hypothesis. These sectors may offer innovative solutions to counteract the negative environmental impacts observed in more traditional industries.


The study also paves the way for future research, particularly in examining the role of forest conservation regulations on FDI. The proposed investigation into the “pollution haven” hypothesis could provide valuable insights into how environmental policies influence economic decisions and their subsequent ecological outcomes.


Finally, the study emphasizes the critical role of multinational corporations in addressing global environmental challenges. By aligning profit motives with corporate social responsibility, companies have the unique opportunity to foster positive environmental change across borders. The call for corporate leadership in sustainability efforts is timely and resonates with the growing demand for responsible business practices.


KEYWORDS:

  • Sectoral FDI

  • FDI ecological halo

  • Forest land

  • Forest ecological footprint

Citation:

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