The effect of ICT infrastructure on inward FDI in APEC countries

Abstract

The objective of this study is to examine the effect of information and communication technology (ICT) infrastructure on inward foreign direct investment (FDI) in the Asia-Pacific Economic Cooperation (APEC) region by using panel data from 20 APEC economies over the 2005-2020 period. Various indicators of ICT-related factors, including number fixed telephone subscriptions, mobile cellular subscriptions, broadband subscriptions, and internet users have been used to measure the level of ICT infrastructure development. Principal component analysis (PCA) method is used to transform four indicators of ICT infrastructure together into an ICT infrastructure index. The study uses fixed-effects model to investigate the effect of ICT infrastructure on inward FDI in APEC countries. The results show that ICT infrastructure has a significant and positive effect on inward FDI in APEC economies. In addition, it is observed that control variables such as the digital economy measuring by share of exports and imports of digitally deliverable services on total exports and imports, GDP, economic openness, and labor force, have significantly positive effect on inward FDI. However, exchange rate and inflation have a negative impact on inward FDI in APEC countries.