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US FDI INTO VIETNAMBY PROJECTNUMBERS


Source: ‘Refugees and Foreign Direct Investment: Quasi-Experimental Evidence fromUS Resettlement’


our results as a causal effect of refu- gees on FDI. Since 1994, when US sanctions,


were lifted, the government of Vietnam has implemented several policies aimed at engaging overseas Vietnamese as part of its overarch- ing growth strategy. These include the 2005 Investment and Enterprise Laws and the 2008 Nationality Law. The reforms created a more favoura- ble environment for overseas Vietnamese investors, and included tax incentives and rent exemptions. While these laws did increase US FDI to Vietnam, FDI increased far more from those cities that hosted larger numbers of Vietnamese refugees. The case of Vietnam suggests


that developing country policies can leverage overseas diasporas for development via FDI. Refugees often maintain close ties to family and friends in their countries of origin, and have extensive knowl- edge of their home markets, languages and customs. Refugee networks provide information on local business opportunities, help maintain trusting relationships and make FDI happen.


Evidence fromrefugees fromall aroundtheworld These effects are not unique to refugees from Vietnam. Our research highlights that this FDI effect is prevalent on average across all refugee origins. The early 1990s witnessed large refugee inflows to the US, notably from Vietnam but also Russia, Ukraine, Iraq, Myanmar and Bosnia and


Herzegovina. US agencies were again in charge of assigning places of residence for those refugees without pre-existing family ties in the US. These refugees did not get to choose the best place to do busi- ness with back home. Instead, refu- gees from each of the origin coun- tries were spread across more than 50 cities on average. We use this quasi-experimental allocation to once more provide causal estimates of the effect of refugees on FDI. Our analysis combines confiden-


tial data on refugees resettled in the US between 1990 and 2000 from the Worldwide Refugee Admissions Processing System, with data on FDI fromfDi Markets. We find that across US cities, a


10% increase in refugee arrivals between 1990 and 2000 increases outward FDI flows to their countries of origin between 2005 and 2015 by 0.54%, FDI projects by 0.24% and FDI jobs by 0.72%. These effects are surprising given the persecution refugees once fled and given the far- from-ideal political conditions that may persist in their origin countries. We find refugees explain a consider- able share of US FDI to Bosnia and Herzegovina, Haiti, Liberia, Moldova and Somalia, for example. To put it simply, when US compa-


nies invest in the countries of origin of refugees, it is most often from those cities that host larger numbers of refugees. Howcan we be sure it is not pre-


existing communities of co-nation- als that attract refugees and foster FDI, rather than the refugees them-


February/March 2021 www.fDiIntelligence.com


selves? To make sure this is not the case, we examine the effect of refu- gees on FDI in cities where there were no economic migrants of the same nationality whatsoever in 1990, before the refugees arrived. In those cases, we can be assured that the FDI effect we measure is due to the refugees.


Development via FDI FDI is an essential ingredient for economic development and long- lasting stable relationships between origin and destination countries. FDI can create good jobs, facilitate technology diffusion and create links with local businesses. FDI is also less likely to experience capital reversals in times of adverse economic shocks. Yet developing countries often struggle to attract investment. Despite the difficult circumstances under which refugees fled, our research shows that these same individuals can foster FDI to their countries of origin. Our research thus highlights that deci- sions taken primarily for humanitar- ian reasons in developed host nations may yield economic benefits for some of the world’s poorest nations.■


Dr Pierre-Louis Vezina is an associate professor in economics at King’s College London. This article is based on the follow- ing academic paper: Mayda, A, C Parsons, H Pham and P-L Vezina (2019), ‘Refugees and Foreign Direct Investment: Quasi- Experimental Evidence fromUS Resettlements’, CEPR Discussion Paper 14242.


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