Effects of Foreign Direct Investment Inflows on Food Security in ASEAN Countries
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Effects of Foreign Direct Investment Inflows on Food Security in ASEAN Countries
- 1. + Effects of Foreign Direct Investment Inflows on Food Security in ASEAN Countries Linhan Huang
- 2. + Food Security Food is the most basic human needs Human rights Social and political stability Poverty reduction Hunger and undernourishment are major obstacles to economic development The State of Food Insecurity in the World (Food and Agricultural Organization(FAO), 2014)
- 3. + What is Food Security? “…when all people at all times have access to sufficient, safe, nutritious food to maintain a healthy and active life” – World Food Summit, 1996
- 4. + Foreign Direct Investment Developed Countries Developing Countries FDI Capital, technologies, human capital, etc.
- 5. + Foreign Direct Investment $778 Billion 54% of Global FDI Inflows
- 6. + FDI and Food Security Modernization Theory FDI Economic Growth of all groups Improved Food Security Dependency Theory FDI Inequality Worse Food Insecurity
- 7. + ASEAN—Association of Southeast Asia Nations Indonesia, Malaysia, Philippines, Singapore, Thailand, Brunei Darussalam, Viet Nam, Lao PDR, Myanmar and Cambodia
- 8. + FDI and Food Security in ASEAN
- 9. + FDI Inflows in ASEAN 0.00 1.00 2.00 3.00 4.00 5.00 6.00 7.00 8.00 2005US$inBillions Year FDI Inflows in ASEAN
- 10. + FDI Inflows in ASEAN 0.72 0.29 2.48 0.07 4.64 0.31 1.23 16.33 4.55 2.61 0 2 4 6 8 10 12 14 16 18 2005US$inBillions Mean FDI Inflows in ASEAN (1989-2011)
- 11. + Food Security in ASEAN Prevalence of Undernourishment Energy supply (kcal/capita/day)Food Protein supply (grams/capita/day) Nutrition
- 12. + Food Security in ASEAN 18.6 23.2 23.7 29.6 39.9 19.9 44.6 24.2 43.8 46.9 12.5 14.9 13.9 10.9 17.1 8.6 27.8 17 7.3 9 0 10 20 30 40 50 World Developing Countries Asia Southeast Asia Cambodia Indonesia Lao,PDR Philippines Thailand Viet Nam Prevalence of Undernourishment (%) Undernourishment Trends 1990-92 vs. 2010-12 (FAO, 2013) 2010-12 1990-92
- 13. + Do FDI inflows exert any positive influence on food security in ASEAN countries?
- 14. + Equation
- 15. + Models
- 16. + Results
- 17. + Prevalence of Undernourishment $10 Billion FDI Inflows 5.8 Percentage Points 30 Million People
- 18. + Daily per Capita Energy Supply $10 Billion FDI Inflows
- 19. + Daily per Capita Protein Supply 12% $10 Billion FDI Inflows Daily protein needed by children between 4-8 years old (Institute of Medicine, 2005)
- 21. + Conclusion FDI Inflows help improve food security in ASEAN countries.
- 22. + References Asian Development Bank. (2012). Food security and poverty in Asia and the Pacific: key challenges and policy issues. Retrieved from http://www.adb.org/sites/default/files/publication/29724/food-security-poverty.pdf Balasubramanyam, V.N., Salisu, M. & Sapsford, D. (1999). Foreign direct investment as an engine of growth. The Journal of International Trade & Economic Development, 8, 27-40. Retrieved from http://web.a.ebscohost.com.ezproxy.lib.purdue.edu/ehost/pdfviewer/pdfviewer?sid=d4ebfd47-ded7-44ac-a654- e92a0d1c2584%40sessionmgr4005&vid=1&hid=4206 Basu, P. & Guarigalia, A. (2007). Foreign direct investment, inequality and growth. Journal of Macroeconomics, 29, 824-839. doi: 10.1016/j.jmacro. 2006.02.004 Food and Agricultural Organization (FAO). (1996). Rome declaration on world food security. Retrieved from http://www.fao.org/docrep/003/w3613e/w3613e00.htm Food and Agricultural Organization. (2013). FAO statistical year book 2013. Retrieved from http://www.fao.org/docrep/018/i3107e/i3107e00.htm Gollin, D., Parente, S.L & Rogerson, R. (2006) The food problem and the evolution of international income levels. Journal of Monetary Economics, 54, 1230-1255. doi: 10.1016/j.jmoneco.2006.04.002 Institute of Medicine. (2005) Dietary reference intakes for energy, carbohydrate, fiber, fat, fatty acids, cholesterol, protein, and Amino Acids (Macronutrients). Washington, CD: The National Academies Press. Jenkins, J. C. & Scanlan, S. (2001) Food security in less developed countries, 1970 to 1990. American Sociological Review, 66,718-744. Retrieved from http://www.jstor.org.ezproxy.lib.purdue.edu/stable/10.2307/3088955?origin=crossref& Makki, S. S., & Somwaru, A. (2004). Impact of foreign direct investment and trade on economic growth: evidence from developing countries. American Journal of Agricultural Economics, 86(3), 795-801. Mihalache-O’Keef, A. & Li, Q. (2011). Modernization vs. dependency revisited: Effects of foreign direct investment on food security in less developed countries. International Studies Quarterly, 55, 71-93. doi: 10.1111/j.1468-2478.2010.00636.x World Health Organization. (n.d. ). Food security. Retrieved from http://www.who.int/trade/glossary/story028/en/ United Nations Conference on Trade and Development. (n.d.) Inward and outward foreign direct investment flows, annual, 1970-2013 [Data file] Retrieved from http://unctadstat.unctad.org/wds/TableViewer/tableView.aspx?ReportId=88United Nations United Conference on Trade and Development. (n.d.) GDP by type of expenditure and Value Added by kind of economic activity, annual, 1970-2012 [Data file]. Retrieved from http://unctadstat.unctad.org/wds/TableViewer/tableView.aspx?ReportId=95 World Bank. (2006). Repositioning nutrition as central to development: A strategy for large-scale action. Why invest in nutrition? Retrieved from http://siteresources.worldbank.org/NUTRITION/Resources/281846-1131636806329/NutritionStrategyCh1.pdf World Bank. (n.d.) Food production index (2004-2006=100) [Data file]. Retrieved from http://databank.worldbank.org/data/views/reports/tableview.aspx World Bank. (n.d.) Prevalence of Undernourishment (% of population) [Data file]. Retrieved from http://databank.worldbank.org/data/views/reports/tableview.aspx
- 23. + Thank You
- 24. + Foreign Direct Investment “Foreign direct investment are the net inflows of investment to acquire a lasting management interest (10 percent or more of voting stock) in an enterprise operating in an economy other than that of the investor. It is the sum of equity capital, reinvestment of earnings, other long-term capital, and short- term capital as shown in the balance of payments.” (World Bank)
- 25. + FDI Inflows in ASEAN
- 26. + Food Security in ASEAN
- 27. + Prevalence of Undernourishment 37.07% 14.72% 0.00 5.00 10.00 15.00 20.00 25.00 30.00 35.00 40.00 PrevalenceofUndernourishment(%) Year Prevalence of Undernourishment (%) in ASEAN (1991-2011)
- 28. + Political Stability In Myanmar, since the outbreak of internal violence in 2012, 140,000 people remain internally displaced and need food assistance. World Food Programme (2014) . Retrieved from https://www.wfp.org/sites/default/files/imagecache/600x400/WFP_MYA_2014_A yuka%20(113).jpeg
Editor's Notes
- Hunger game is now hot in the movie theaters. However, what we really need is not a hunger game, but hunger fight. Picture here shows a little girl feeding her younger siblings in the South-east of Myanmar, also known as Burma. They are not sure where or how they could get the next meal, not even thinking about food with more nutrition
- According to FAO 2014 food insecurity report, worldwide, we still have at least 805 million people, or one in nine, do not have enough to eat. Food is the most basic needs of human beings. It is inseparable with the discussion of human rights, social and political stability as well as poverty reduction. Any effort toward achieving a higher living standard and peace of society must include strategies to ensure food security first. Food security is key in economic development. How can people be productive if they are suffering from hunger and are unhealthy because of undernourishment? The 1979 Nobel prize winner in Economics, Theodore William Schultz argued that until poor countries can meet their food needs, they are not able to begin the process of modern economic growth.
- In 1996, the World Food Summit defined the concept of food security as “when all people at all times have access to sufficient, safe, nutritious food to maintain a healthy and active life” (Food and Agricultural Organization (FAO), 1996).
- Transition: However, not much scholar attention has been paid to determinants of food security and even less for foreign direct investment (FDI)’s influence on that although along with the globalization, FDI is playing a more and more important role in driving the global economy, especially developing countries. It is one of the most useful vehicles to transfer advanced technologies, human capital, etc. from developed countries to developing countries (Makki & Somwaru, 2004).
- According to World Investment Report (2014), The average growth rate of FDI inflows to developing countries over the past 10 years is about 17%. In 2013, FDI inflows to developing countries reached a new high to $778 billion, amounted to 54% of global FDI inflows. They significantly advance economic growth in developing countries.
- FDI’s impact on food security remain disputable. Based on literature review, there are two theories regarding the relationship between these two.
- This paper examines FDI inflow’s effect on food security in member countries of Association of Southeast Asia Nations (ASEAN) from 1989-2011. ASEAN was formed in 1967 by Indonesia, Malaysia, Philippines, Singapore and Thailand. Brunei Darussalam, Viet Nam, Lao PDR, Myanmar and Cambodia joined later in 1990s, making up the ten member states of ASEAN today. Food security related data are not available for Singapore. Singapore is excluded in the regression analysis of FDI inflows’ impact on food security in ASEAN countries.
- The reason for choosing this group is that FDI has always been playing a significant role in ASEAN economy for its openness and global integration. Southeast Asia is one of the regions in the world that have already met the WFS hunger target. There must be something we can learn from this region for the relationship between FDI and food security. So a general overview of FDI and Food security in ASEAN first.
- Mean FDI inflows in Singapore is way more higher than other countries in ASEAN, almost three times that of Malaysia, whose average inflow is the second highest. The lowest is Lao.
- In my paper, I used three variables to measure food security based on FAO’s definition of food security and literature review, which are prevalence of undernourishment and daily per capita energy and protein supply.
- Overall, the region has achieved great progress in food security. Figure 1 presents the comparison of Prevalence of Undernourishment in 1990-92 with that in 2010-12. Data are retrieved from FAO Statistics Yearbook 2013. Prevalence of undernourishment in Southeast Asia has been dropped from 29.6% to 10.9%. The progress is greater than average level of that in Asia and developing countries. The 18.7 percentage point decrease is a lot higher than that in developing countries (8.3) and Asia (9.8). Prevalence of undernourishment in Viet Nam and Thailand has fallen from over 40% to less than 10% over this period while countries like Cambodia, Lao, Philippines, although have achieved large reduction, still have a relatively high level of undernourishment in 2010-2012 compared to the average level of both all developing countries and Asia.
- Here, again, since we are inspecting FDI’s impact on food security, the coefficient of the most interest here is b1. X1, X2 etc. refer to other control variables as we build up the models. To account for the unobserved factors related to country characteristics and different time periods, country and year dummies denoted as θc and δt respectively are included. (theta and delta) It may take some time for FDI and other control variables to have impact on current food security situation. And to eliminate the possibility that FDI cause change in other control variables, I lagged FDI by 1 year and other explanatory variables by 2 years.
- This is the regression table of prevalence of undernourishment. As you can see, I added GDP, Government consumption, Export, Food production Index step-by-step to further examine FDI’s impact on food security. The models for energy and protein supply follow the same procedure.
- The results show that FDI inflows have significant and negative effect on prevalence of undernourishment, meaning that it helps reduce undernourishment. FDI inflows exert significant and positive effects on both energy and protein supply. As I control for more factors in the models (real GDP per capita, GDP growth rate, government consumption, merchandise export and food production), FDI inflows effects on reducing prevalence of undernourishment stays at the 1% confidence level while the effectiveness declines; FDI inflows’ positive impacts on energy and protein supply both increase and become more statistical significant.
- Jenkins & Scanlan (2001, food security in less developed countries from 1970 to 1990) conclude that political democratization and internal violence influence both food supply and hunger with child hunger primarily shaped politically. Volatile politic issues also stand for high risks for foreign investors, adversely affecting FDI inflow. So I added political stability index to the three full models as an extra robustness test due to limited data. The index “ measures perceptions of the likelihood of political instability and/or politically-motivated violence, including terrorism” (FAO). The power of FDI in reducing prevalence of undernourishment drops by half and the significance becomes lower. Effectiveness of FDI inflow on energy supply decreases about 25% while the coefficient stays at the 1% confidence level. Unlike the other two models, FDI’s impact on protein supply become greater and more significant. However, one should interpret results from this table with caution because the limited data available for this variable.
- Within the scope of my research, FDI inflows do help improve food security in ASEAN countries in terms of prevalence of undernourishment, energy and food supply. The mechanism might be the modernization theory mentioned before. For other countries that suffer food insecurity, being more open to foreign investors and integrated into the global economy may be a good way to reduce hunger and the undernourished. Furthermore, though not soundly proved in this paper, based on previous studies, internal political stability might play a significant role in FDI and Food security. The government should put effort in maintaining a peaceful and stable society in order to attract more FDI for economic growth and eliminate hunger.
- Life At Thel Kal Pyin Camp Since the outbreak of intercommunal violence in 2012, 140,000 people remain internally displaced. https://www.wfp.org/sites/default/files/imagecache/600x400/WFP_MYA_2014_Ayuka%20(113).jpeg