The Impact Of Infrastructure Quality On Foreign Direct Investment

As one of the basic production factors that affect a country's economic growth level,infrastructure plays an important role that can't be ignored in attracting foreign direct investment.Since the financial crisis,foreign direct investment has once again ushered in the peak of development.Various countries have made various efforts to attract foreign direct investment.In particular,developing countries have massively introduced foreign direct investment to accelerate their integration into global value chains.At the same time,China has proposed an innovative deep-level regional cooperation mechanism-"the Belt and Road" strategy.In the strategy,it has emphasized the important role of infrastructure in economic development and regional cooperation.Previous academic research focused on the impact of infrastructure's scale on the foreign direct investment.This paper intends to explore the role of infrastructure quality in developing countries in attracting foreign direct investment.Based on the sample of 62 developing countries,collected and organized various factors from 2005 to 2014 that influence the sample countries' ability to attract foreign direct investment,such as infrastructure quality,economic scale,labor cost,opening degree,capital and labor ratio,education level,political institutional environment etc.,.The relationship between the quality of infrastructure in developing countries and the ability to attract and utilize foreign direct investment was tested empirically on the basis of the panel data which composed of key variables such as infrastructure quality,economic scale,labor cost,opening degree,capital and labor ratio,education level,political institutional environment and interaction items of infrastructure quality and labor costs.The empirical regression results indicate that high infrastructure quality will have a significant positive effect on foreign direct investment,and at the same time,the improvement of infrastructure quality will enlarge the attractiveness of host country's cheap labor to multinational enterprises.In addition to examining the role of foreign direct investment in the overall infrastructure quality of developing countries,this paper divided infrastructure into traffic infrastructure,communications infrastructure,and energy infrastructure according to different industry classifications.The ability of quality to influence foreign direct investment has been empirically analyzed.The empirical results show that the improvement of the quality of transport infrastructure,the quality of communications infrastructure,and the quality of energy infrastructure are all conducive to strengthening the ability of developing countries to attract foreign direct investment.At the same time,the host country's economic scale,dependence on trade,education popularization,proportion of production factors,and political institutional environment will also play a significant role.In the context of today's "the Belt and Road" initiative's view of attaching importance to infrastructure construction that has attracted worldwide attention and foreign direct investment is increasingly becoming an important driver of a country's economic development,developing countries should focus on seeking to other driving forces of economic growth instead of relying mainly on natural resource reserves.Other than economic growth,developing countries should increase their emphasis on country's infrastructure construction,increase investment in infrastructure,improve the quality of infrastructure,and make active use of domestic and foreign capital and advanced technologies to better utilize infrastructure to make better use of the positive role of foreign direct investment.Based on the theoretical and empirical analysis of this article,it is believed that developing countries should pay more attention to the improvement of infrastructure quality,rely on improved and high-quality infrastructure to enhance the attraction of foreign direct investment and the ability to use the "overflow effects" of foreign direct investment.This will strengthen the country's international competitiveness and achieve its goal of integrating into the global value chain.