Research On The Effect Of Foreign Direct Investment In Laos

It has been proved that the foreign direct investment (FDI) plays a positive role in region’s economic development.All of the Governments are active in making corresponding policies to guide foreign capital into their country. Laos began to implement the reform and opening up policy in 1986,which made the Laos government consider how to attract the foreign investment. Since then Foreign direct investment (FDI) has been appearing in Laos. Laos’Foreign direct investment is increasing year by year, which is mainly from China,South Korea, India and other countries. FDI promotes the economic growth and social development, it also brings some problems at same time, such as environmental pollution, crowding out the local investment capital and so on. If Laos government doesn’t pay attention to the FDI’s negative effects, it will be bad for Laos’ economy in the future. Therefore, this paper chooses Laos which is a typical development country in Southeast Asian countries as the research object to analyze the effects of the FDI. So that we can clearly recognize how the FDI impacted on Laos social and economy in the past twenty years. I hope the research evidence can help Laos government adjust the policy of absorbing capital so as to absorb more investments from transnational corporations,which is good for Laos economic development in the future.On the basis of that, firstly, this paper described the theory of FDI, including monopolistic advantage theory, product life cycle theory, internalization theory, the eclectic theory of international production and compared advantage theory etc..Secondly, this paper Mainly analyses Laos’FDI investment environment, the numbers of investment project, investment industries and investment amount.What’s more, this paper mainly introduces two FDI flows industries in Laos, which are the electric power and the mining. Finally, based on the qualitative analysis, this paper uses Laos’1990-2012 statistical data which contains the GDP, domestic investment, foreign capital, labor force, the forest of the existing area and carbon dioxide to build a model.The data verifies the positive effect of economic growth, FDI extrusion effect in investment, employment effect, ecological destruction effect and pollution of the environment effect. The result shows that FDI has significant effects on the economic growth, crowding out domestic investment and ecology destroying, while its has non-significant effects on the environment pollution and employment.Based on the analysis of the current situation of foreign direct investment in Laos, this paper suggests that Laos can optimize the investment environment, improve the foreign direct investment inflows structure, enhance ecological environment protection and other measures to attract foreign investment.