Unleashing the Potential of Globalization to Bring Sustainable Prosperity in the Selected Asian and African Countries: Panel Least-Squares Analysis

Abstract

Given the globalization wave started in the early 1990s, many countries around the world, including countries in Asia and Africa, became more open to Foreign Direct Investment (FDI) flows. This main objective of this research is to empirically investigate the theoretical relationship of FDI and trade (export and import) on economic growth which can deliver direct impact to reducing the poverty rate and narrowing unemployment gap as well as generate income per capita across the countries, primarily in Asian and African countries. The availability of data for all explanatory variables determines a unified sample period that goes from 2003 to 2018 (15 years). Additionally, our sample covers seven countries such as Egypt, Jordan, Indonesia, Malaysia, Nigeria, Pakistan, and Turkey, which chosen based on data availability and good representative sampling of the countries by its population and size of the economy. Thus, the study estimated FDI and trade model using panel least-squares analysis.The study provides evidence of the large and significant impact of FDI on trade, economic growth, and poverty in the major of Asian and African countries when it has taken as one pooled group. Furthermore, as expected, trade affected income per capita and poverty reduction in this group's countries favourably. FDI and trade as variables of globalization can bring positive impact to prosperity and wealth for the countries. A further explain that the selected countries urgently need to strengthen the investment policy and create a business-friendly environment to support trade openness, massive investment, and non-barrier trade agreement.