Foreign direct investment and the current environmental situation: Evidence from Binh Duong, Vietnam


Authors

  • Nguyen Bach Dang Eastern International University
  • Pham Thi Hong Nhung Eastern International University
  • Phan Thi Nga Eastern International University
DOI: https://doi.org/10.57110/vnu-jeb.v5i4.340

Keywords:

Foreign direct investment, environmental pollution, pollution halo, pollution haven, Vietnam

Abstract

The main objective of this study is to investigate what makes the difference in the impact of FDI on environmental pollution according to the effect of the "pollution halo" and “pollution haven” hypotheses, and the current status of FDI and environmental pollution in Binh Duong province. We applied the document analysis, systematic review method of Bryman & Bell (2011), and the descriptive statistical method. The secondary data includes Binh Duong's FDI capital and environmental pollution indicators during the period from 2021 to 2023. The findings indicate that the “pollution halo” effect is primarily influenced by the influx of FDI capital from developed countries and the presence of high-quality FDI capital. Besides, the host country's environmental policy is an important factor in minimizing the environmental pollution. A significant portion of FDI comes from developing countries and a decline in FDI quality is occurring in the study area. Furthermore, the indicators related to environmental pollution are also increasing locally. This is an extremely worrying issue because it has a high potential risk of causing environmental pollution according to the “pollution haven” hypothesis. Governments at all levels should develop appropriate policies to create favorable conditions for the simultaneous development of an industrial structure towards high technology and automation, while promoting a favorable environment for foreign investors.

References

Abdoulie, M., & Hammami, S. (2017). Investigating the causality links between environmental quality, foreign direct investment and economic growth in MENA countries. International Business Review, 26 (2), 264-278.

Abid, M. (2016). Impact of economic, financial, and institutional factors on CO2 emissions: evidence from sub-Saharan Africa economies. Utilities Policy, 41, 85-94.

Abid, M., Schilling, J., Scheffran, J., & Zulfiqar, F. (2016). Climate change vulnerability, adaptation and risk perceptions at farm level in Punjab, Pakistan. Science of the Total Environment, 547, 447-460.

Aliyu, M. A. (2005). Foreign direct investment and the environment: Pollution haven hypothesis revisited. The 8th Annual Conference on Global Economic Analysis, Lübeck.

Aliyu, M.H., Jolly, P.E., Ehiri, J.E., Salihu, H.M. (2005). High parity and adverse birth outcomes: Exploring the maze. Birth, 32(1), 45-59.

An, T., Xu, C., Liao, X. (2021). The impact of FDI on environmental pollution in China: Evidence from spatial panel data. Environmental Science Pollution Research, 28, 44085-44097.

Antweiler, W., Copeland, B. R., & Taylor, M. S. (2001). Is free trade good for the environment? American Economic Review, 91(4), 877-908.

Asghari, M. (2013). Does FDI promote MENA region’s environment quality? Pollution halo or pollution haven hypothesis. Int J Sci Res Environ Sci, 1(6), 92-100.

Aung, T. S., Fischer, T. B., & Shengji, L. (2020). Evaluating environmental impact assessment (EIA) in the countries along the belt and road initiatives: System effectiveness and the compatibility with the Chinese EIA. Environmental Impact Assessment Review, 81, 106361.

Ayamba, E. C., Haibo, C., Ibn Musah, A. A., Ruth, A., & Osei-Agyemang, A. (2019). An empirical model on the impact of foreign direct investment on China’s environmental pollution: analysis based on simultaneous equations. Environmental Science and Pollution Research, 26, 16239-16248.

Binh Duong Statistics Department (2023a). Socio-economic situation of Binh Duong province. Binh Duong Statistics Department, Binh Duong Province.

Binh Duong Province People's Committee (2023b). Report on environmental protection work in 2023. People's Committee of Binh Duong Province.

Baharumshah, A. Z., Slesman, L., Devadason, E. S. (2017). Types of foreign capital inflows and economic growth: New Evidence on role of financial markets. Journal of International Development, 29 (6), 768-789.

Bryman, A. & Bell, E. (2011). Business Research Methods. 3rd ed. Oxford: Oxford University Press.

Cai, Y., Chang, T., & Inglesi-Lotz, R. (2018). Asymmetric persistence in convergence for carbon dioxide emissions based on quantile unit root test with Fourier function. Energy, 161, 470-481.

Center for Global Development (2015). Climate Change and Development in Three Charts. https://www.cgdev.org/media/developing-countries-are-responsible-63-percent-current-carbon-emissions

Cole, M. A., Elliott, R. J., & Fredriksson, P. G. (2006). Endogenous pollution havens: Does FDI influence environmental regulations? Scandinavian Journal of Economics, 108(1), 157-178.

Cole, M. A., Elliott, R. J., Zhang, L. (2017). Foreign direct investment and the environment. Annual Review of Environment and Resources, 42, 465-487.

Demena, B. A., & Afesorgbor, S. K. (2020). The effect of FDI on environmental emissions: Evidence from a meta-analysis. Energy Policy, 138, 111192

Eskeland, G. S., & Harrison, A. E. (2003). Moving to greener pastures? Multinationals and the pollution haven hypothesis. Journal of Development Economics, 70 (1), 1-23.

Esty, D. C., & Dua, A. (1997). Sustaining the Asia Pacific Miracle: Environmental Protection and Economic Integration. Peterson Institute Press: All Books.

Golub, S. S., Kauffmann, C., & Yeres, P. (2011). Defining and measuring green FDI: An exploratory review of existing work and evidence.

Hao, Y., Wu, Y., Wu, H., & Ren, S. (2020). How do FDI and technical innovation affect environmental quality? Evidence from China. Environmental Science and Pollution Research, 27, 7835-7850.

He, J. (2006). Pollution haven hypothesis and environmental impacts of foreign direct investment: The case of industrial emission of sulfur dioxide (SO2) in Chinese provinces. Ecological Economics, 60 (1), 228-245.

Iamsiraroj, S. (2016). The foreign direct investment–economic growth nexus. International Review of Economics & Finance, 42, 116-133.

IMF (International Monetary Fund) (1993). Balance of Payments Manual 5th Edition, Washington DC.

International Energy Agency (2018) Global energy & Co2 status report. Global Energy & CO2 Status Report, 1-15.

Keho, Y. (2015). Foreign direct investment, exports and economic growth: Some African evidence. Journal of Applied Economics & Business Research, 5(4).

Kim, Y., & Rhee, D. E. (2019). Do stringent environmental regulations attract foreign direct investment in developing countries? Evidence on the “Race to the Top” from cross-country panel data. Emerging Markets Finance and Trade, 55(12), 2796-2808.

Kok, R., & Acikgoz Ersoy, B. (2009). Analyses of FDI determinants in developing countries. International Journal of Social Economics, 36 (1/2), 105-123.

Lan, J., Kakinaka, M., & Huang, X. (2012). Foreign direct investment, human capital and environmental pollution in China. Environmental and Resource Economics, 51, 255-275.

Lee, J. W. (2013). The contribution of foreign direct investment to clean energy use, carbon emissions and economic growth. Energy Policy, 55, 483-489.

Muhammad, B., & Khan, S. (2019). Effect of bilateral FDI, energy consumption, CO2 emission and capital on economic growth of Asia countries. Energy Reports, 5, 1305-1315.

Naughton, H. T. (2014). To shut down or to shift: Multinationals and environmental regulation. Ecological Economics, 102, 113-117.

NOAA (Global Monitoring Laboratory). (2023). The Noaa Annual Greenhouse Gas Index (Aggi) Accessed on 30/03/2024. https://gml.noaa.gov/aggi/aggi.html

OECD (Organization for Economic Cooperation and Development) (1996). Benchmark Definition of Foreign Direct Investment, 3rd Edition, Paris.

Pegkas, P. (2015). The impact of FDI on economic growth in Eurozone countries. The Journal of Economic Asymmetries, 12(2), 124-132.

Perkins, R., & Neumayer, E. (2009). Transnational linkages and the spillover of environment-efficiency into developing countries. Global Environmental Change, 19 (3), 375-383.

Sattar, A., Hussain, M. N., & Ilyas, M. (2022). An impact evaluation of belt and road initiative (BRI) on environmental degradation. Sage Open, 12 (1), 21582440221078836.

Singhania, M., & Saini, N. (2021). Demystifying pollution haven hypothesis: Role of FDI. Journal of Business Research, 123, 516-528.

Sitthivanh, P., & Srithilat, K. (2021). The impact of foreign direct investment on environmental quality in ASEAN countries. Journal of Resources, Energy and Development, 18 (1-2), 27-40.

Solarin, S. A., Al-Mulali, U., Musah, I., & Ozturk, I. (2017). Investigating the pollution haven hypothesis in Ghana: an empirical investigation. Energy, 124, 706-719.

Sunde, T. (2017). Foreign direct investment, exports and economic growth: ADRL and causality analysis for South Africa. Research in International Business and Finance, 41, 434-444.

Tracy, E. F., Shvarts, E., Simonov, E., & Babenko, M. (2017). China’s new Eurasian ambitions: the environmental risks of the Silk Road Economic Belt. Eurasian Geography and Economics, 58 (1), 56-88.

Victor, P. A. (2017). Pollution: Economy and Environment. Routledge.

Waldkirch, A., & Gopinath, M. (2008). Pollution control and foreign direct investment in Mexico: an industry-level analysis. Environmental and Resource Economics, 41, 289-313.

Walter, I., & Ugelow, J. L. (1979). Environmental policies in developing countries. Ambio, 102-109.

Wang, D. T., & Chen, W. Y. (2014). Foreign direct investment, institutional development, and environmental externalities: Evidence from China. Journal of Environmental Management, 135, 81-90.

Wang, X., & Luo, Y. (2020). Has technological innovation capability addressed environmental pollution from the dual perspective of FDI quantity and quality? Evidence from China. Journal of Cleaner Production, 258, 120941.

Wheeler, D. (2001). Racing to the bottom? Foreign investment and air pollution in developing countries. The Journal of Environment & Development, 10 (3), 225-245.

Xiao, D., Gao, L., Xu, L., Wang, Z., & Wei, W. (2023). Revisiting the green growth effect of foreign direct investment from the perspective of environmental regulation: Evidence from China. International Journal of Environmental Research and Public Health, 20 (3), 2655.

Yang, Q., & Song, D. (2019). How does environmental regulation break the resource curse: Theoretical and empirical study on China. Resources Policy, 64, 101480.

Yu, X., & Li, Y. (2020). Effect of environmental regulation policy tools on the quality of foreign direct investment: An empirical study of China. Journal of Cleaner Production, 270, 122346.

Zugravu-Soilita, N. (2017). How does foreign direct investment affect pollution? Toward a better understanding of the direct and conditional effects. Environmental and Resource Economics, 66, 293-338.

Downloads

Download data is not yet available.

Published

25-08-2025

Abstract View

12

PDF Downloaded

How to Cite

Nguyen Bach Dang, Pham Thi Hong Nhung, & Phan Thi Nga. (2025). Foreign direct investment and the current environmental situation: Evidence from Binh Duong, Vietnam. VNU University of Economics and Business, 5(4), 50. https://doi.org/10.57110/vnu-jeb.v5i4.340

Issue

Section

Original Articles