Foreign Direct Investment and Small and Medium Enterprises: Productivity and Access to Finance PDF
Preview Foreign Direct Investment and Small and Medium Enterprises: Productivity and Access to Finance
Foreign Direct Investment and Small and Medium Enterprises Productivity and Access to Finance 9616hc_9789814678803_tp.indd 1 3/3/15 3:00 pm TTTThhhhiiiissss ppppaaaaggggeeee iiiinnnntttteeeennnnttttiiiioooonnnnaaaallllllllyyyy lllleeeefffftttt bbbbllllaaaannnnkkkk Foreign Direct Investment and Small and Medium Enterprises Productivity and Access to Finance Khee Giap Tan • Kong Yam Tan Lee Kuan Yew School of Public Policy, NUS, Singapore World Scientific NEW JERSEY • LONDON • SINGAPORE • BEIJING • SHANGHAI • HONG KONG • TAIPEI • CHENNAI 9616hc_9789814678803_tp.indd 2 3/3/15 3:00 pm Published by World Scientific Publishing Co. Pte. Ltd. 5 Toh Tuck Link, Singapore 596224 USA office: 27 Warren Street, Suite 401-402, Hackensack, NJ 07601 UK office: 57 Shelton Street, Covent Garden, London WC2H 9HE British Library Cataloguing-in-Publication Data A catalogue record for this book is available from the British Library. Foreign DireCt investment anD smaLL anD meDium enterPrises Productivity and access to Finance Copyright © 2015 by World Scientific Publishing Co. Pte. Ltd. All rights reserved. This book, or parts thereof, may not be reproduced in any form or by any means, electronic or mechanical, including photocopying, recording or any information storage and retrieval system now known or to be invented, without written permission from the publisher. For photocopying of material in this volume, please pay a copying fee through the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, USA. In this case permission to photocopy is not required from the publisher. ISBN 978-981-4678-80-3 In-house Editor: Dong Lixi Typeset by Stallion Press Email: [email protected] Printed in Singapore Lixi - Foreign Direct Investment.indd 1 3/3/2015 4:38:55 PM March11,2015 4:24:41pm WSPC-B2093 content Foreign Direct Investment and Small and Medium Enterprises: Productivity and Access to Finance CONTENTS About the Editors 1 Introduction Foreign Direct Investment (FDI), Productivity Spillovers and the Role of Small and Medium Enterprises (SMEs) Financing Khee Giap Tan and Kong Yam Tan 3 Chapter 1 Globalization, Foreign Direct Investment, and Regional Innovation in China Yi Zhang and Hein Roelfsema 9 Chapter 2 Trade and Investment Liberalization in India: Implications for Productivity Gains Ram Upendra Das 35 Chapter 3 Foreign Direct Investment, Intellectual Property Rights, and Productivity Growth Sasatra Sudsawasd and Santi Chaisrisawatsuk 57 Chapter 4 A New Regime of SME Finance in Emerging Asia: Enhancing Access to Growth Capital and Policy Implications Shigehiro Shinozaki 77 Chapter 5 Informal Firms and Financial Inclusion: Status and Determinants Subika Farazi 105 Chapter 6 Promoting SMEs and Enhancing Labor Productivity in Singapore: A Policy Analysis Khee Giap Tan and Yan Yi Tan 133 Chapter 7 Determinants of Entrepreneurs’ Activities: New Evidence from Cross-Country Data Doaa M. Salman 145 Index 161 TTTThhhhiiiissss ppppaaaaggggeeee iiiinnnntttteeeennnnttttiiiioooonnnnaaaallllllllyyyy lllleeeefffftttt bbbbllllaaaannnnkkkk March11,2015 4:15:25pm WSPC-B2093 About-the-Editor About the Editors Khee Giap Tan is the Co-Director of Asia Competitiveness Institute and Associate Professor at the Lee Kuan Yew School of Public Policy. He is also the Chairman of Singapore National Committee for Pacific Economic Cooperation. Upon graduating with a PhD from University of East Anglia, England, in 1987 under the Overseas ResearchSchemeawardedbytheCommitteeofVice-ChancellorsandPrincipalsofthe Universities of the United Kingdom, he joined the banking sector as a treasury manager and served as secretary to the Assets and Liabilities Committee for three years, there after he taught at the Department of Economics and Statistics, National UniversityofSingapore,1990–1993.DrTanjoinedNanyangTechnologicalUniversity in1993andwasAssociateDean,GraduateStudiesOffice,2007–2009.Heisnowwith Lee Kuan Yew School of Public Policy, National University of Singapore. Dr Tan has consulted extensively with the various government ministries, statutory boards and government linked companies of Singapore government on policies concerning fi- nancial, fiscal, trade, tourism, public housing, labor, telecommunication, tourism, liveable cities, creative industry, media, community development, airport and seaport activities.HehasalsoservedasaconsultanttointernationalagenciessuchastheAsian Development Bank, Asian Development Bank Institute, United Nations Industrial DevelopmentGroup,WorldGoldCouncil,ASEANSecretariat,CentralPolicyUnitof Hong Kong, Kerzner International, Las Vegas Sands, Marina Bay Sands, and other international financial institutions and multinational corporations. Dr Tan is the lead authorforeightbooksandpublishedininternationalrefereedjournalssuchasApplied Economics (UK), ASEAN Economic Bulletin (Singapore), Asian Economic Papers (US), Competitiveness Review (UK), International Journal of Business Competition andGrowth(UK),InternationalJournalofChineseCultureandBusinessManagement (UK), International Journal of Economics and Business Research (UK), International Journal of Indian Culture and Business Management (UK), Journal of Centrum Ca- thedra The Business and Economics Research Journal (Peru), Journal of International Commerce, Economics and Policy (UK), Journal of Southeast Asian Economies (Singapore), Review of Pacific Basin Financial Markets and Policies (US), and World ReviewofScience,TechnologyandSustainableDevelopment(Switzerland).Heisthe associate editor of the journal Review of Pacific Basin Financial Markets and Policies 1 March11,2015 4:15:25pm WSPC-B2093 About-the-Editor AbouttheEditors 2 (US). His current research interests include econometric forecasting, Cost of Living Index, Global Liveable Cities Index and competitiveness analysis on 31 provinces in China, 35 states in India and ASEAN-10 economies. KongYamTanispresentlytheCo-DirectoroftheAsiaCompetitivenessInstitute.He is also Professor of Economics at the Nanyang Technological University. From June 2002 to June 2005, he was a senior economist at the World Bank office in Beijing where he worked on issues of macro stabilization, integration of the fragmented do- mestic market, banking reform, international trade and investment, energy security as wellasregionalinequality.In2004,hewasamemberoftheWorldBankexpertgroup on the eleventh fiveyear plan (2006–2010) for the State Council in China. The expert group provided analysis and policy recommendations on urbanization, regional in- equality, innovation policy, energy and water policy as well as strategy on banking reform to the Chinese government. Prior to that, he was the chief economist of the Singaporegovernment(1999–2002),Head,DepartmentofBusinessPolicy,Facultyof Business Administration at the National University of Singapore (NUS). He is a graduate of Princeton (1975–79, class of 1931 scholar, Paul Volcker Thesis prize) and StanfordUniversity(1980–83),wherehecompletedhisMasterandPhDinthreeyears. Prior to joining NUS, he has worked at the Hoover Institution at Stanford University, World Bank, the Monetary Authority of Singapore, and was the Director of Research at the Ministry of Trade and Industry in Singapore. His research interests are in internationaltradeandfinance,economicandbusinesstrendsintheAsiaPacificregion and economic reforms in China. He has published ten books and numerous articles in major international journals including American Economic Review, World Bank Economic Review, Long Range Planning, Australian Journal of Management etc on economicandbusinessissuesintheAsiaPacificregion.Heservedasboardmemberat the Singapore Central Provident Fund Board (1984–96) and the National Productivity Board (1989–90). He has also consulted for many organizations including Temasek, GIC, Citigroup, IBM, ATT, BP, ABN-AMRO, Ikea, Bank of China, China Con- struction Bank, People's Bank of China, EDB, Areva, Capitaland, Guangdong pro- vincialgovernment,Samsung,MauritiusGovernment,MinistryofTradeandIndustry, Mobil, Singapore Technology, etc. March11,2015 4:25:40pm WSPC-B2093 Introduction Introduction Foreign Direct Investment (FDI), Productivity Spillovers and the Role of Small and Medium Enterprises (SMEs) Financing KheeGiapTanandKongYamTan AsiaCompetitivenessInstitute LeeKuanYewSchoolofPublicPolicy NationalUniversitySingapore,Singapore Abstract There is a large literature dealing with the spillover effects offoreign direct investment (FDI) flows to emerging and developing economies at the aggregate level. Beyond the aggregate impacts, a growing number of studies also examine the impact of FDI spillovers on firms of different sizes, especially small and medium enterprises (SMEs). This book features seven chapters of empirical studies dedicated to exploring issues relating to thevarious interactions between FDIflows, productivityspilloversandSMEsinAsiaandbeyond. Keywords:Foreigndirect investment;smallandmediumenterprises; productivityspillovers. The surge in foreign direct investment (FDI) flows to the emerging and developing world, especially to the Asian region as it has given rise to a large body of literature examining the multi-dimensional impacts of FDI on productivity spillovers in do- mestic economies, both at the aggregate and firm levels. While the focus of the early related literature was mostly aggregate in nature, the development of better firm-level datasetshaveresultedinagrowingnumberofstudiesfocussingonthespillovereffects of FDI on firms of varying sizes, particularly the small and medium enterprises (SMEs). Considering the important role SMEs play in several emerging and devel- oping economies, in terms of employment generation and their contribution to output, it is important to understand thevarious interactions between the different dimensions of economic globalization and the opportunities and challenges faced by SMEs in theseeconomies.More importantly, theaftermath of theglobal financialcrisis andthe resultantriseinriskaversionhasresultedinchokingthetraditionalfinancingchannels available to SMEs. Easing credit constraints to revitalise the SMEs remains a policy priority as improved access to financing could allow financially constrained firms to increase their total factor productivity (TFP). In this context, there is a need to design effective policies that will not only address the challenges faced by SMEs, but also 3
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