DOES DIGITALIZATION ATTRACT FOREIGN DIRECT INVESTMENT IN THE LOGISTICS SECTOR? EVIDENCE FROM EMERGING MARKETS AND CENTRAL ASIA
DOI:
https://doi.org/10.5281/zenodo.20477146Keywords:
Digitalization, foreign direct investment, logistics, emerging markets, Central Asia, panel data.Abstract
This study examines whether digitalization drives FDI inflows into the logistics sector across 35 emerging market economies over 2010–2024. Using fixed-effects panel regression models with World Bank Digital Adoption Index (DAI) and Logistics Performance Index (LPI 2.0) data, the research tests three hypotheses. First, digitalization has a statistically significant positive effect on logistics FDI — a one standard deviation increase in the DAI corresponds to a measurable rise in FDI as a share of GDP. Second, this effect is stronger in countries that already have efficient logistics systems, confirming that digital and physical infrastructure are complementary rather than substitutes. Third, the digitalization–FDI relationship is notably weaker in Central Asian countries despite their active reform programs, due to structural barriers including landlocked geography, underdeveloped transport networks, and weak institutions. Robustness checks using lagged variables and an alternative ICT penetration indicator confirm the consistency of the findings. The results suggest that digital reform must be accompanied by customs modernization, transport infrastructure investment, and improved regulatory frameworks in order to fully unlock its potential for attracting foreign investment.
References
1.Baldwin, R. (2016) The Great Convergence: Information Technology and the New Globalization. Cambridge: Harvard University Press.
2.Blonigen, B. A. and Piger, J. (2014) ‘Determinants of foreign direct investment’, Canadian Journal of Economics, 47(3), pp. 775–812.
3.Calderón, C. and Servén, L. (2008) Infrastructure and Economic Development in Sub-Saharan Africa. World Bank Policy Research Working Paper No. 4712. Washington, D.C.: The World Bank.
4.Dunning, J. H. (1988) ‘The eclectic paradigm of international production: a restatement and some possible extensions’, Journal of International Business Studies, 19(1), pp. 1–31.
5.International Telecommunication Union (2025) Measuring Digital Development: Facts and Figures 2025. Geneva: ITU Publications.
6.Leitao, N. C. (2012) ‘Foreign direct investment, democracy and economic freedom’, International Journal of Economics and Financial Issues, 2(2), pp. 185–192.
7.Pradhan, R. P., Arvin, M. B., Hall, J. H. and Nair, M. (2019) ‘ICT infrastructure and economic growth: a causality study for 135 countries’, Applied Economics, 51(35), pp. 3884–3903.
8.UNCTAD (2025) World Investment Report 2025: International Investment in the Digital Economy. New York: United Nations.
9.UNESCAP (2025) Foreign Direct Investment Trends and Outlook in Asia and the Pacific 2024/2025. Bangkok: United Nations Economic and Social Commission for Asia and the Pacific.
10.World Bank (2025a) Digital Adoption Index. Washington, D.C.: World Bank. Available at: https://data.worldbank.org
11.World Bank (2025b) Connecting to Compete 2025: Logistics Performance Indicators 2.0. Washington, D.C.: World Bank. Available at: https://lpi.worldbank.org
12.World Bank (2025c) World Development Indicators. Washington, D.C.: World Bank. Available at: https://data.worldbank.org
13.World Bank (2025d) Worldwide Governance Indicators. Washington, D.C.: World Bank. Available at: https://info.worldbank.org/governance/wgi
14.World Economic Forum (2024) Global Competitiveness Report 2024. Geneva: WEF.
Downloads
Published
Issue
Section
License
This work is licensed under a Creative Commons Attribution 4.0 International License.
Authors retain the copyright of their manuscripts, and all Open Access articles are disseminated under the terms of the Creative Commons Attribution License 4.0 (CC-BY), which licenses unrestricted use, distribution, and reproduction in any medium, provided that the original work is appropriately cited. The use of general descriptive names, trade names, trademarks, and so forth in this publication, even if not specifically identified, does not imply that these names are not protected by the relevant laws and regulations.
