Are FDI Inflows Crucial for Environmental Protection in Various Asian Regions?

Abstract

The paper’s main goal is to investigate and contrast the impacts of foreign direct investment (FDI) inflows on environmental protection in various Asian locations. In order to achieve this end, the validity of the Halo/Haven pollution hypothesis is examined using a panel data framework for the annual data of 32 Asian economies over the period of 2000–2019. While the sign of squared Gross Domestic Product (GDP) per capita is not statistically significant for low- and lower-middle-income group of Asian economies, which does not confirm the existence of EKC hypothesis in these countries, the main results showed that the Environmental Kuznets Curve (EKC) hypothesis exists in high- and upper-middle-income group of Asian nations. In the group of Asian nations with high- and upper-medium-incomes, there is the Halo hypothesis; in the group of nations with low- and lower-middle-incomes, there is the Haven pollution hypothesis. Important practical policies recommended by this research include promoting green finance methods, creating digital economic mechanisms, and revising laws and policies that encourage FDI in order to enhance their ability to attract foreign investors in the post-Corona era.