Foreign direct investment, information and communication technology, trade, and economic growth in the South Asian Association for Regional Cooperation countries: An empirical insight

• Published date: 01 February 2020
• Author: Narayan Sethi,Padmaja Bhujabal
• DOI: http://doi.org/10.1002/pa.2010
• Date: 01 February 2020

ACADEMIC PAPER

Foreign direct investment, information and communication

technology, trade, and economic growth in the South Asian

Association for Regional Cooperation countries: An empirical

insight

Padmaja Bhujabal | Narayan Sethi

Department of Humanities and Social

Sciences, National Institute of Technology

(NIT), Rourkela, India

Correspondence

Narayan Sethi, Associate Professor,

Department of Humanities and Social

Sciences, National Institute of Technology

(NIT), Rourkela, Odisha, India.

Email: nsethinarayan@gmail.com

Information and communication technology (ICT) is one of the key sectors promoting

economic growth in the present modern era of globalization. It promotes technologi-

cal advances in global communications as well as production techniques and contrib-

utes to economic growth and development. Most of the economic activities,

including international trade and foreign direct investment (FDI), are largely depen-

dent on various modern sources of ICT. The objective of this study is to examine the

dynamic relationship between FDI, ICT, trade, and per capita gross domestic product

growth across the South Asian Association for Regional Cooperation (SAARC) devel-

oping nations from 2000 to 2017. We have used different panel estimates such as

fully modified ordinary least squares, dynamic ordinary least squares, Fisher–

Johansen cointegration test, panel autoregressive distributed lag, and Dumitrescu–

Hurlin causality. We found existence of unidirectional causality from FDI to ICT and

bidirectional causal relationship between trade and ICT. The outcome of our study

suggests policy recommendations for improving the standards of ICT, specifically

focusing on economic growth, trade openness, and facilitation of foreign investment

in the SAARC countries.

JEL CLASSIFICATION

F21; D83; O47; C23

1|INTRODUCTION

Information and communication technology (ICT) is one of the key

sectors promoting economic growth in the present modern era of

globalization. It promotes technological advances in global communi-

cations as well as production techniques and contributes to economic

growth and development. Because of the onset of globalization, it is

imperative for the countries to develop their information and commu-

nication infrastructure and to create a suitable environment for the

dissemination of information within and among the countries. The

process of globalization necessitates and is facilitated by the wide and

rapid implementation of the ICT process. However, there are many

hindrances, such as unavailability and limited access to broadband

services. This may be due to the expensive nature of these services,

which makes it difficult for the majority of the common masses to

afford. The advantages of ICT include providing new innovative

means of disseminating information and opportunities to the general

masses of the population, overcoming the cultural and social barriers.

The interactivity and global reach of ICT allows customized sharing of

knowledge, materials, and databases, quickly and cheaply over long

geographic distances (Kaware & Sain, 2015). It has been studied that

most of the economic activities, including international trade and for-

eign direct investment (FDI), are largely dependent on various modern

sources of ICT.

Another advantage of the advancement in ICT is that it integrates

different parts of the world to one. It enables the developing countries

Received: 19 July 2019 Revised: 14 August 2019 Accepted: 21 August 2019

DOI: 10.1002/pa.2010

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https://doi.org/10.1002/pa.2010