Does foreign investment contribute to national wealth and sustainable economic development

Source: The World Bank. Wealth Accounting Data Catalog. Access mode: https://datacatalog.worldbank.org/dataset/wealth-accounting for selected OEcD countries, (% of migrants with high education from total immigration stock)

Table 5

Source: developed by author on the basis of Brain drain database. Access mode: https://www.iab.de/en/daten/iab-brain- drain-data.aspx

Author assumes that the positive and relatively high NFA values for Switzerland, Belgium, Singapore, and Norway are due to developed financial sector and its high share in GDP output. Still, Australia and USA face problems with attracting foreign investment to cover their domestic needs in foreign capital and to cope with debt servicing problems since both countries debt levels rise steadily since 2007-2010 financial crisis, reaching more than 30% of GDP in Australia and more than 250% of GDP in USA.

Conclusions and prospects for further research

Foreign investment can become a powerful mechanism for mobilizing tangible and intangible assets that would contribute to national wealth and sustainable economic growth, and therefore to nations wellbeing. Foreign investment may play both positive and detrimental role for sustainable economic growth and wealth growth.

1. The positive impact of foreign investment on national wealth and economic growth in terms of sustainable development framework is possible when recipient country has specific conditions to absorb foreign capital inflows: developed financial system, favorable conditions for education of local population, well-developed physical infrastructure, R&D, and institutions. Thus, FDI absorption is more essential than FDI attractiveness.

2. The ambiguous nature of foreign investment requires application of single-country approach in order to assess its impact on economic performance.

3. The negative impact of foreign investment, called investment spillovers, include: overvalued exchange rates leading to diminishing exports; national financial systems' failure to allocate FDI to productive uses; national debt increase; negative effects on local environment; foreign control over their most valuable resources; social inequality risk.

4. The main conditions for effective attraction of foreign investment include: high technologies import and emulation; human capital development through increase of domestic learning.

5. Net foreign assets play insignificant role in national wealth growth for developed economies, which testifies that joint action is needed to ensure sustainable foreign direct investment determination and encouragement. Foreign investment leads to government debt increase, if not absorbed by structural elements of national wealth. Subsequent research perspectives include the impact of foreign investment on productive and human capital growth.

Table 6 National wealth structure by asset classes, 2014 (%)

Source: developed by author with the use of World Bank Wealth Accounting Data Catalog

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