The Impacts of Expenses for Population Health and Education of Human Resources on the Inflow of Foreign Direct Investments to Selected Islamic Country Members of MENA

Document Type : پژوهشی

Authors

• hatef hazeri ¹
• naser sayfolahi ²

¹ mohaghegh ardebili

² Mohagagh Ardabili

https://doi.org/10.22067/pm.v25i16.62871

Abstract

Introduction

Nowadays, foreign direct investment (FDI) is one of the best and most prominent methods in the area of financing investment projects. In addition to financing, employing this type of investment follows other purposes such as improving technology, developing skills and management for refining the qualitative abilities of domestic work force, developing export markets, increasing the standards of domestic productions and moving towards the global market economy. In other words, foreign direct investments enables domestic enterprises to have more access to the global markets as well as facilitating technology transfer (Dargahi, 2006).
Alongside the role and significance of foreign direct investments, many policy makers along with economic organizations and institutions have asserted the importance of population health and forming a human capital, especially in the developing countries during recent years. In this regard, much emphasis has been placed on the development of population health and forming human capital as one of the effective factors in increasing the tendencies of countries toward attracting private investments, both foreign and domestic. Furthermore, the World Health Organization (WHO) acknowledged healthy work force as one of the most significant effective factors in human capital as well as attracting foreign direct investments (The Commission on Macroeconomics and Health, 2010).

Theoretical Framework

There are a number of reasons concerning the role and impact of population health in attracting FDI. In general, a high level of healthcare alongside other factors would increase a country’s ability to attract foreign direct investments; in return, death and disease due to weak healthcare lead to an increase in production expenses followed by a decrease in the inflow of foreign direct investment. In other words, healthcare is an inseparable part of human capital, the reinforcement of which would increase the productivity of work force along with the escalation of economic growth (Celine and Desbordes, 2009).
Macroeconomic analyses through measuring anthropometric indices (including nutrition status, height, etc.) and disease indices (such as the number of days missed by a worker due to illness) have shown that healthcare impacts the productivity of workers (Ribero, 2008). By developing productivity, health-related expenses along with improving the individuals’ health in a society can increase the level of production followed by enhancing the country’s capability to attract foreign direct investments (Bleakley, 2010).
In addition to the role and significance of healthcare as a consumer product, improving health-related conditions of the work force as a particular form of human capital can directly increase economic efficiency at individual level and ultimately, in the society (Azam, 2015). This is due to the fact that a work force with a proper health condition is at a better state in terms of physical, spiritual, and productivity aspects, compared to an unhealthy work force. In return, weak healthcare results in the reduction of productivity and consequently, low incomes which would eventually lead to improper nutrition and health state. Bhargava, Jamison and Murray (2001) concluded that economic growth and attracting foreign direct investments caused by improving healthcare conditions have majorly occurred in developing countries compared to industrial ones.
 

Method

The present inquiry is a descriptive study. Descriptive studies entail a set of methods with the purpose of describing certain conditions or phenomena. The purpose of the present research is applied, as the aim of such studies are to gain the required understanding or knowledge so as to determine the tools, through which a certain, known necessity can be mitigated.
Main Hypothesis

Increasing the expenses for population health and education of human resources has a significant impact on the inflow of foreign direct investments.

Secondary Hypotheses

The market size (income per capita) has a significant impact on the inflow of foreign direct investments.
The degree of trade freedom has a significant relationship with the inflow of direct investments.

4-Results & Discussion
According to the results, the estimation regression model is not false, and all variables are expected and consistent with theoretical foundations. The coefficient of determination of the fitted model indicates that 86% of the direct foreign investment inflow to the Islamic countries of the MENA country is explained by three variables: market size (per capita income), health and education expenditures, and the degree of trade liberalization. Based on table results, the estimated coefficients of these variables are positive and significant at the 90% confidence level. As the increase in each of the variables Per capita income, the share of health and education expenditures on GDP and the degree of trade liberalization, have led to an increase in FDI inflows into the studied countries.

Conclusion and Suggestions

The results obtained from the goodness of model show that the portion of expenses for healthcare from gross domestic production alongside education is an important parameter concerning the extent of inflow of foreign direct investments to the Islamic country members of MENA. In fact, improving healthcare and education and the development of human capital in general, through enhancing the productivity of the work force, reducing investment risks, and offering high-level skills to the work force along with indirect impacts such as providing desirable social conditions lead to more attraction of foreign investments in Islamic country members of MENA. Furthermore, increasing GDP per capita as a result of enhancing capabilities to attract foreign investment flows and expanding market capacity can increase the inflow of FDI. Additionally, increasing the trade share gained form gross domestic production caused by domestic products and moving towards global market economy can play a role of utmost importance in offering positive trade impacts on foreign direct investments. As a result, it is recommended that in order to attract more foreign investments, a human resource development policy can be incorporated which may entail population health and educational policies along with other attraction strategies.

Keywords

• Key words: Vertical Foreign Direct Investment
• Population Health
• Human resource
• Islamic MENA Countries

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