The impact of foreign direct investment inflows on sustainable development : evidence from an emerging middle-income economy

Abstract

Policymakers and global financial institutions promote foreign direct investment (FDI) as a driver of economic growth in developing countries; however, questions remain if FDI actually promotes sustainable development. It may encourage growth, but also hinder social and environmental development. In the study, I analyse whether FDI promotes or hinders sustainable development in developing countries, using Bangladesh as an example of an emerging middle-income country. Literature in this field indicates that FDI inflows can have positive or negative impacts on sustainable development, depending on the absorptive capacity of the country, the regulatory system, and the sector where FDI is directed. I focus on the manufacturing sector in Bangladesh and contribute to the literature on FDI and economic growth, inequality, and sustainable development by analysing the impact of FDI on all three dimensions of sustainable development "" the economic, the environmental, and the social. In general, the impact of FDI inflows on economic and social sustainability is positive in Bangladesh, while the environmental dimension of sustainable development is hindered. Bangladesh should consider environmental issues seriously in the case for promoting FDI inflows in the country; otherwise, FDI inflows could cause irreversible damage to the environment and hinder sustainable development and social wellbeing. Based on the findings of the analysis, the thesis also offers policy suggestions to steer the FDI inflows towards sustainable development for developing countries.

Date of Award	2020
Original language	English