Efficacy of ICT and FD in promoting manufacturing exports: Evidence from BRI developing countries

Abstract

Manufacturing export is the important indicator of economic health as it represents the economic activities being held in the country and exports of domestic production to international market. The export volume of developing countries is relatively low in the international market. To promote exports of manufacturing sector, financial development plays a vital role to provide finance to firms having financial constraints while the adoption of ICT improves the information availability and increases the innovative activities in the manufacturing industries. Thus, the purpose of this research is to examine how information & communication technology and financial development, as well as their combined effect contributes to manufacturing exports in the developing nations participating in the Belt and Road Initiative. The data set used in this study is panel data of selected 58 BRI developing countries for the period of 1990 to 2020. To estimate the model, generalized methods of moments and two-stage least square is used. The estimates show that both ICT and FD have significant and positive effects on the manufacturing exports which indicate that due to reliance of manufacturing industries on external source of finances, disproportionate benefits are grabbed by the industries having access to financial instruments. While internet penetration accommodate them to advance the research and development through lessening information frictions and reducing the transaction costs. The results also reveal the combined effect of FD and ICT on the manufacturing exports which implies that ICT and FD strengthen each other‘s effects. DRSML QAU xi This study urges the policymakers to make development in the financial sector by providing access to finance on easy terms for export-oriented firms and government should give ICT related subsidies to firms to increase their exports. Firms also need to update their system by adopting internet-enabled services like e-commerce etc. Due to time constrain we couldn’t able to expand research at the disaggregated level. However, for future research it is suggested to extend this study by analyzing the impact of ICT, FD and their composite effect on the manufacturing exports at disaggregate level and compare the degree of effect on the basis of income-level of BRI countries. The originality of this study is that the composite effect of financial development and information and communication technology has not been investigated on the country level manufacturing exports of BRI developing countries. Keywords: Manufacturing Export, Financial Development, Information and Communication Technology, Generalized Methods of Moments, Two-Stage Least Square