Make your own free website on Tripod.com

Guide on How to Write University Essays, Courseworks, Assignments and Dissertations

Truth about FDI

Home
Articles Library
Medicine, Psychology and Sociology Articles
Business Articles
Economics Articles
Industry Lifecycle
Marketing Mix
McKinsey 7S Framework
Product Life Cycle
Ansoff Analysis
BCG Growth-Share Matrix
Value Chain
Porter's Generic Strategies
Scenario Planning
PEST analysis
SWOT Analysis
Porter's 5 Forces analysis
Sitemap
Comments about this web site
Favorite Links
How to write an Essay
How to Write the Coursework or Report
How to write the Marketing or Marketing Communications Campaign
How to write the Dissertation
Where to start?
How to choose an area of research
How to define Issue or Argument
How to define Issue or Argument
How and where to review the literature
Research Methods
Dissertation Structure
Some tips to survive your dissertation: some predictable crisis
Important tips to succeed the dissertation
Databases of Academic Journals and Publications; Market Data
Essay Sites
Student Tricks
Exam Preparation Tips
Company-Based Reports
BALANCED SCORECARD
Critical Success Factors
Competitor Analysis
Review

Foreign Direct Investment can be defined as the investment made to acquire lasting interest in enterprises operating outside the economy of the investor (Wikipedia 2007 [online]). Whether FDI promotes development in the recipient countries is a subject which has enjoyed a vibrant debate from various commentators. There is little sign of agreement among commentators and policy makers as to the true effect of FDI. Yet despite the discordant voices on the subject, FDI has in recent years experienced some form of rebirth. The mistrust of FDI of yesteryears seems to have given way for some guarded faith in the ability of FDI to help foster development, albeit with caveats (Balasubramanyam, Wei). The scarcity of choice for finance especially bank credit may have something to do with it. Most developing countries which have traditionally been willing to bend over backwards to attract FDI do regulate the operations of foreign owned firms, which might include the ownership structure, hiring policies and procurement. The World Trade Organisation has rules on these kinds of things and they are called Trade Related Measures (TRIMS).

 

FDI, some have said is like cholesterol. There is the good type and the bad type (Kaminsky et al, 1998). The good foreign direct investment should avail the recipient country both the market skills and guarantee some market access to make it worthwhile (Aitken et al, 1997). It should be rooted inside the economy in a way that it should remain there even during bad times. Otherwise, such investment would be the first to take flight when the economy begins experiencing even mild troubles. This is based on the reasoning that FDI first came into that country because it had confidence about the long term prospects of that country. Any other reason would be speculation which would not be good for the economy. The bad FDI is the one which is speculative especially on foreign exchange rates. This kind of FDI is usually the first to bail out of an economy when the bad times come, further exacerbating the problem.

 

There are many types of FDI, the main types being inward FDI and outward FDI. Inward FDI is when foreign capital is invested on local resources. Outward FDI is when local capital is invested on foreign resources (Wikipedia 2007 [online]).

 

There are many possible effects of FDI to the recipient country. Usually, investing firms bring with them technological prowess which then can build synergies with other favourable factors available in the recipient country which includes low wages. This way, production becomes cost-effective and can result into the improvement of the local economy and the welfare of the world economy as a whole. FDI may in some cases contribute to the increasing of the country’s output due to the increase in the capital stock. This phenomena is however not limited to the FDI alone. Of the more unpleasant effects of the FDI is that FDI may lead to the displacement of local investment, but, again, this is not limited to FDI. On average, foreign firms pay higher wages than local ones. This alone may lead to a situation where the foreign firms grab the best brains in an economy leaving the rest of the sector malnourished in labour terms, leading to lower levels of productivity in the local investments.

 

References

 

1. Bromstrom, M, Montgomery, E, Moran TH. (2005). Does Foreign Investment Promote Development? Peterson Institute, Washington D.C.

 

2. Balasubramanyam, VN, Wei Y, (2004). Foreign Direct Investment: Six Countries Studies. 

 

3. Aitken, B, Gordon H. H, and Ann E. H. (1997). "Spillovers, Foreign Investment and Export Behavior." Journal of International Economics, 43, pp. 103-32.

 

4. Kaminsky, G, Lizondo, S and. Reinhart, CM. (1998). “Leading Indicators of Currency Crises." IMF Staff papers. Vol. 5 No. 1, pp. 1-48.

 

5. URL http://en.wikipedia.org/wiki/ Foreign_direct_investment. Last accessed 25 October 2007.

 

C/E/171. Master's Dissertation. Foreign Direct Investment in Russia: analysing the case of the EBRD in St. Petersburg

C/E/133. Dissertation. Analysis of FDI inflow: Russian case

S/E/115. Foreign Direct Investment to developing countries: pros and cons

E/E/64. Hong Kong-China Business: Attentions and implications from the recent China's economic data

E/E/60. Foreign direct investment policy in China

E/E/40. Discuss the potential advantages which global businesses might enjoy when investing direct into host countries and explain the type of policies host governments can adopt to maximise the economic benefits of inward investments.

S/E/69. Dissertation. The relationship between Foreign Direct Investment (FDI) and Economic Growth with reference to Czech Republic

P/E/491. MNC investment in third world countries

P/E/457. Chinese economic growth and FDI

P/E/454. Chinese economy: role of FDI and trade relations with Western countries

P/B/738. Determinants of FDI in MNC

P/E/444. Report on Chilean mining industry and investment incentives

C/E/126. China vs. India: FDI

C/E/125. Identify and outline the main features of theories of determinants of Foreign Direct Investment. Using examples from any countries known to you evaluate the usefulness of such theories in explaining the global distribution of Foreign Direct Investment.

P/E/439. Effects of FDI on economic growth of developing countries

P/B/708. Foreign direct investment by MNC: advantages and threats

P/E/406. Foreign direct investment in Chinese economy: opportunities and implications

C/E/111. FDI in emerging economies: the case of EEC

P/E/391. Policy of selective incentives towards FDI: case study of Newport factory failure

C/E/110. FDI in emerging economies: the case of EEC

P/F/524. Foreign investment in Chinese economy (case study of Samsung and Diageo)

P/B/561. Advantages of MNE theory over FDI theory

S/E/62. Reasons why firms engage in FDI, and the various FDI theories

P/E/329. Does domestic economy gain from the presence of multinational companies?

P/E/394. Attractions for FDI in Republic of Ireland

C/B/359. What would make India more attractive for FDI than China?

C/B/339. Financial Direct Investment: Chile vs China

P/B/269. Discuss typical motivations of governments in attempting to influence FDI flows

C/B/121. Foreign direct Investment in Eastern European Countries

C/B/122. Review of FDI theories

P/E/322. Theories of foreign direct investment and multinational corporations

P/E/319. Theories of foreign direct investment and case study of China

P/E/317. Role of FDI in economic growth of China

P/B/511. Investing in Indian film industry

P/E/306. Dissertation. FDI: theory and impacts on Bulgarian economy

P/F/367. Attracting foreign direct investment in UK

C/E/91. Level and type of capital inflows into Poland. How have they responded as the financial and economic conditions in Poland changed?

P/E/237. FDI in Russia and South Korea

P/E/224. Economies of Russia and China and the impacts of FDI

P/E/211. Venezuela: Opportunities for Foreign Direct Investment (FDI)

C/E/68. Dissertation. Has FDI stimulated economic growth in Russia?

P/E/162. Foreign Direct Investment

P/E/136. Analyse the growth in foreign direct investment in the world economy over the last twenty years

C/B/121. Foreign direct Investment in Eastern European Countries

C/B/122. Review of FDI theories

P/E/107. Trade Theory vs. Political Issues in Explaining Trade Flows

P/E/105. FDI in Russia

P/E/99. Dissertation. Foreign Direct Investment in Canada

P/E/14. China s headlong rush into the modern world may involve a heavy price in terms of environmental damage: Discuss.

P/E/46 EMU and the Euro: advantages and disadvantages

H/E/10. China and Romania: Moving Towards a Free Market Economy?

H/E/11. What were the causes of Argentinean economy collapse?

P/E/54. Foreign Direct Investment Policy: the Case of Germany

Enter supporting content here