[Podcast] The Impact of FDI, ICT, Green Finance and Financial Development Policies on Economic Growth: Evidence from APEC

Keywords: Economic growth, FDI, Financial development, Green finance, ICT

To evaluate the economic development strategies and sustainable economic development of countries and territories belonging to the Asia-Pacific Economic Cooperation Forum (except Taiwan) in the period from 2000 - 2020 through measuring the effectiveness of FDI, ICT, Green Finance, and Financial Development policies, the student research team of the University of Economics Ho Chi Minh City (UEH) carried out the project "The impact of FDI, ICT, Green Finance and Financial Development policies on economic growth: Evidence from APEC". This was also the foundation for researching and developing sustainable development policies in Vietnam.

In 2020, in the 4.0 Industrial Revolution context, the complicated Covid-19 pandemic, the alarming situation and the urgency of environmental protection, the APEC economy in general was faced with unpredictability, having more or less impacts on the growth rate and sustainable development goals of the national economy. Besides, regarding factors affecting economic growth, there have been analyses showing that FDI and financial development are potential factors with both positive and negative impacts. The important thing is that, how we can take advantage of FDI and financial development to promote economic growth, thereby creating a more prosperous future. Therefore, the study was conducted to evaluate the strategies that contributed to the sustainable economic development of APEC before the COVID-19 pandemic broke out through measuring the effectiveness of FDI, ICT, Green Finance and Financial Development policies.

Important indicators affecting economic growth

In this topic, the UEH research team focused on studying the Green Finance index (GF) and other indicators related to the socio-economy such as ICT, Financial Development (DLIQLIA and DPRICRE) and FDI.

The first index mentioned was Green Finance - GF, a very important index measuring the effectiveness of Green Finance policies in countries, as evidenced in previous studies (Ning & She, 2014; Failer & Li, 2019; Ouyang, Guan, & Yu, 2023; Yang, Su, & Yao, 2021; Haiyang, 2017; Wang, Tsai, Du, & Bi, 2019; Chen, Zhang, Bai, & Li, 2021; Dabyltayeva & Rakhymzhan, 2019; Taghizadeh-Hesary, & Yoshino, 2019). However, the results from previous studies on the relationship between economic growth and Green Finance universally agreed that: Green Finance had a negative impact on economic growth both in scale and size. The development and resource allocation of green finance was not beneficial to the long-term macro economy and even hindered economic growth. However, Green Finance has been identified as an option to achieve the Sustainable Development Goals.

Information and communications technology - ICT - was the second index mentioned with a direct relation to economic growth. Previous studies indicated that ICT had significant negative effects on economic growth. However, some studies concluded that ICT had a negligible impact as a result of poor access to communication technology and the existence of outdated technology in many developing countries. The authors discovered that in the long term, ICT had a positive impact on economic growth, but in the short term, it had a negative impact. Therefore, the group also focused on considering proposals that developing countries should take appropriate measures to regain the positive role of ICT in promoting economic growth such as liberalizing trade regimes, improving human resources and applying favorable government policies.

The third index was Financial Development. It was found that this was an index that had a two-way impact on economic growth. Apparently, most research pointed out the negative impact of financial development on economic growth due to the short-term instability and fragility of the financial system in developing countries.

The fourth index of interest to the authors was foreign direct investment - FDI, an important factor in the research model on economic growth. The authors found that most studies believed that FDI played an important role in promoting economic growth in both direct and indirect ways. Foreign direct investment FDI was an important source of capital for the recipient country, directly contributing to promoting economic growth and stimulating economic growth through spillover effects such as new technology, capital formation, human resource development, employment and international trade expansion.

To achieve the research results, the authors used the OLS regression method with data from 20 countries and territories belonging to the Asia-Pacific Economic Cooperation Forum (APEC) for the period 2000 - 2020 to evaluate the impact of FDI, ICT, Green Finance and Financial Development on APEC's economic growth, thereby obtaining the final research result that: FDI had a positive impact on economic growth of a country, and the financial development of a country as represented by credits to the private sector (DPRICRE) had no impact on economic growth. Meanwhile, with the representative variable being the financial liquidity index (DLIQLIA), the author found that there was a negative impact on economic growth; the interactive relationship between FDI and financial development had no impact on economic growth; and green financial policies had no impact on economic development; Finally, the development of information and communication technology (ICT) had a negative impact on economic growth.

Research significance and recommendations

The region's financial development needs to be maintained and further improved to avoid negative impacts when a crisis damaging the financial system occurs, resulting in negative impacts on international economic growth.

Information and communication technology (ICT) systems had a negative impact on the economic growth of countries in the Asia-Pacific region. Therefore, policymakers can study the negative impacts of Information and Communications Technology (ICT) Systems on economic growth. The causes of this negative impact may be due to the low development of information and communication systems in the region.

According to the Global Sustainable Investment Alliance (GSIA), global sustainable investment assets will reach USD 35.3 trillion in 2020, an increase of 15% compared to 2018, illustrating the enormous potential of Green finance in allocating capital for sustainable development and economic growth efforts. Fiscal policy is essential in guiding the development trajectory of green finance. Therefore, the Government and regulatory agencies need to increase the use of various policy tools to improve the effectiveness of green finance on economic growth.

The results of this study will partly provide information regarding what factors affect economic growth, the effectiveness and compatibility of each policy on economic growth, and especially sustainable economic growth, helping the Government and businesses adjust and develop policies to meet development goals. Besides, the research has positive implications for University of Economics Ho Chi Minh City in particular and society in general on the journey towards a green, sustainable environment, as well as helping UEH students approach environmental issues from the perspective of an economics student analyzing, understanding and applying effective policies in the future towards a sustainable and developed economy.

The research has explicitly contributed to SDG 8 - Decent work and economic growth, and SDG 11 - Sustainable cities and communities. The entire research article The Impact of FDI, ICT, Green Finance and Financial Development Policies on Economic Growth: Evidence from APEC can be found HERE.

Authors: Le Quoc Chi, Ngo Tuan Phong, Nguyen Ngoc Y Nhi, Nguyen Van Anh Tai - University of Economics Ho Chi Minh City (UEH).

This article is part of the Green Research Community series with the message "Research Contribution for UEH Living Lab Green Campus". UEH cordially invites the community to await the next Green Research Community issue.

*In order to maximally facilitate the development of the "UEH Green Researcher Community", community members will be able to participate in research methodology classes related to the topic of Living lab, Green Campus. In addition, if the product meets the required standards, the research team will be conferred a certificate from the UEH Sustainable University Project Board and financial support.

SDG 8 - Decent work and economic growth:

Goal 8 is to promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all. Maintain economic growth rates per capita in accordance with national circumstances and, in particular, achieving at least a 7% annual growth rate of gross domestic product, achieving higher levels of economic productivity through diversification, upgrading and innovation, and promoting development-oriented policies that support productive activities, creating sustainable jobs, entrepreneurship, creativity and innovation. In addition, improving global resource efficiency in production and consumption, protecting labor rights and promoting safe and secure working environments for all workers, strengthening the capacity of domestic financial institutions to encourage and expand access to banking, insurance and financial services for all. Developing and implementing a global youth employment strategy and implementing the International Labour Organization's Global Employment Pact,...

SDG 11 - Sustainable cities and communities:

Goal 11 is to make cities and human settlements inclusive, safe, resilient and sustainable. Enhance the resilience of cities to disasters. By 2030, ensure access for all to adequate, safe and affordable housing and basic services and upgrade slums. Strengthen the capacity of all countries, in particular developing countries, to plan and manage urban development in a sustainable manner. Protect and safeguard the world's cultural and natural heritage. By 2030, reduce the adverse per capita environmental impact of cities, including by paying special attention to air quality and municipal and other waste management. Provide universal access to green and public spaces, in particular for women and children, older persons and persons with disabilities.

News and photos: Authors, UEH Youth Union - Student Association, UEH Department of Marketing and Communication.