...Determinants of FDI THE POWER OF FDI IN REGARDS TO GLOBALIZATION: Globalization is an inevitable and irreversible process, and dealing with the imperatives of globalization capitalizing on its positive aspects and mitigating the negative ones is perhaps the most important challenge for today. Globalization has enhanced the opportunities for success, but it has also posed new risks to developing countries. Globalization has many faces; however, globalization is first and foremost comprehended in economic and financial terms. In this sense, it may be defined as the broadening and deepening linkages of national economies into a worldwide market for goods, services and especially capital. Perhaps the most prominent face of globalization is the rapid integration of production and financial markets over the last decade; that is, trade and investment are the prime driving forces behind globalization. Foreign direct investment (FDI) has been one of the core features of globalization and the world economy over the past two decades. It has grown at an unprecedented pace for more than a decade, with only a slight interruption during the recession of the early 1990s. More firms in more industries from more countries are expanding abroad through direct investment than ever before, and virtually all economies now compete to attract multinational enterprises (MNEs). This trend has been driven by the complex interaction of technological change, evolving corporate strategies towards...
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...National competitive advantage 1. Determinants of national advantage for industry are fourfold a. Factor conditions: nations position in factor of production necessary to compete in given industry (eg: skilled labor, infrastructure) b. Demand conditions: Nature of home demand for the industry’s product or services c. Related and supporting industries: Presence/Absence in nation of supplier industries and related industries that are international competitive d. Firm strategy: Conditions governing how companies create, organized ad managed and the nature of domestic rivalry 2. Porter’s model also included government influence and chance events – regards as important influences rather than determinants 3. Strong relationship between the four determinants and two influences over time foster national competitive advantage in various industries 4. Porter identifies some of the influencing factors that strengthen its contribution to national advantage of an industry Determinants | Influencers | Factor creation | 1. Stimulated by a cluster of domestic rivals 2. Stimulated by perceived national challenges 3. Priorities for factor-creating investment influence by home demand 4. Stimulated the creation of transferable factors by related and supporting industries | Home demand conditions | 1. Intense rivalry increases home demand and makes it more sophisticated 2. Group of rivals builds a national image and recognition as...
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...DETERMINANTS OF FDI IN CHINA DETERMINANTS OF FDI IN CHINA Shaukat Ali and Wei Guo1 ABSTRACT Why and how firms take advantage of foreign opportunities, especially via foreign direct investment (FDI) has been much documented. China, as a major emerging market, has attracted significant flows of FDI, to become the second largest receipt. This paper briefly examines the literature on FDI and focuses on likely determinants of FDI in China. It then analyses responses from 22 firms operating in China on what they see as the important motivations for them to undertake FDI. Results show that market size is a major factor for FDI especially for US firms. For local, export-orientated, Asian firms, low labor costs are the main factor. The paper concludes with managerial implications for businesses wish to exploit opportunities in China. INTRODUCTION The past few years has seen a tremendous growth of foreign direct investment (FDI) that has exceeded both world output and world trade. China is by far the largest recipient, and in 2004 surpassed the USA as host destination. It has consequently attracted an increasing attention from multinational businesses. Since China adopted the reform and opening-up policy in the late 1970s, foreign investment has played an increasingly important role in its economic growth. According to the World Investment Report for 2004 by the United Nations Conference on Trade and Development, China absorbed a total of US$53.5 billion worth of ...
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...Centrepoint Humanities Edition VOL.14, NO.1, PP.52-72 Determinants of Import in Nigeria: Application of Error Correction Model Bayo Fatukasi Department of Economics, Adekunle Ajasin University, Akungba-Akoko, Ondo State & Bernard Olagboyega Awomuse Dept. of Mathematics and Statistics Rufus Giwa Polytechnic, Owo, Ondo State Abstract This paper assesses the determinants of demand functions for import in Nigeria using variables Real Gross Domestic Product (RGDP), External Reserves (EXTR), Real Exchange Rate (REXCH), and Index of Openness (OPNS) as determinant factors. The central aim of the study is to investigate the behavior of Nigeria’s aggregate import demand and its determinant (function) and then analyse the data from the period 1970 to 2008 and based on the above objectives, proffer policy proposals based on the results obtained from the analysis, for the optional management and control of Nigeria’s import demand. All the data used for the total import. Independent variables were obtained from the Central Bank of Nigeria (CBN) year 2008 golden jubilee edition of statistical bulletin. The error correction model (ECM) approach was employed for analysis. The results reveal that the error correction model (ECM(-1)) is significant. This shows that a long run relationship exist among the quantity of import demand and its determinants over sample period of 1970 to 2008. The statistical significance of the lagged error correction model ECM(-1) suggests that the aggregate import...
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...Major Determinants and Hindrances of FDI inflow in Bangladesh: Perceptions and Experiences of Foreign Investors and Policy Makers An assignment on Major Determinants and Hindrances of FDI inflow in Bangladesh: Perceptions and Experiences of Foreign Investors and Policy Makers Submitted To: S. M. Zahidur Rahman Associate Professor Submitted By: Tasnuba Nowrin ID-090316 Fatema Khatun ID- 090349 KHULNA UNIVERSITY Business Administration Discipline BBA Program 4th Year, 1st Term Course Title: Financial Management and Institution Course No: FIN-4203 September 10, 2012 Summary on previous article Foreign Direct Investment (FDI) is considered as a crucial component for economic development of a developing country. Countries that are lagging behind to attract FDI are now formulating and implementing new policies for attracting more investment. The determinants which play as a driving force for attracting FDI are geographical location, cheap labour cost, and government attitude towards liberalization of the existing laws of the host country, skilled manpower, incentives for investors, and exemption of taxes etc. According to Bangladesh Board of Investment Handbook (2007) Bangladesh offers an attractive investment climate compared to other South Asian Economies. But among the emerging economies India and China are the desired choice for investment (Baskaran and Muchie, 2008). FDI is considered as an important tool for economic development in a developing country. If...
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...-Meaning of Foreign Policy:- In modern times no state can avoid in the international sphere. This involvement must be the systematic and based on some well-defined principles. The principle and purpose of a state is reflected in the foreign policy. The importance of the foreign policy has been highlighted by scholars in various ways. According to one scholar a state without a foreign policy is like a ship without radar which drifts aimlessly without any direction by every storm and sweep of events. There is no unanimity amongst scholars regarding the meaning of foreign policy. “A state’s foreign policy is the totality of its dealings with the external environment. A foreign policy statement can be simple or it may be complicated in...
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...Financial Services & Management Research Vol.1 Issue 8, August 2012, ISSN 2277 3622 FOREIGN DIRECT INVESTMENT AND ECONOMIC GROWTH IN INDIA R. ANITHA* *Assistant Professor, Anna Adarsh College for Women, Chennai, Tamil Nadu, India. ABSTRACT Foreign Direct Investment (FDI) plays a very important role in the development of the nation. It is very much vital in the case of underdeveloped and developing countries. A typical characteristic of these developing and underdeveloped economies is the fact that these economies do not have the needed level of savings and income in order to meet the required level of investment needed to sustain the growth of the economy. In such cases, foreign direct investment plays an important role of bridging the gap between the available resources or funds and the required resources or funds. It plays an important role in the long-term development of a country not only as a source of capital but also for enhancing competitiveness of the domestic economy through transfer of technology, strengthening infrastructure, raising productivity and generating new employment opportunities. In India, FDI is considered as a developmental tool, which helps in achieving self-reliance in various sectors and in overall development of the economy. India after liberalizing and globalizing the economy to the outside world in 1991, there was a massive increase in the flow of foreign direct investment. This paper analyses FDI inflow into the country during the Post Liberalization...
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...is the independent and gross domestic product, foreign direct investment exchange rate are the dependent variables. Depending on the availability of data we have selected the longest possible sample period to avoid the small sample bias. A sample period of 24 years has been selected for this study for the period of 1988-2011 with annual frequency. We use histogram, scatter plot matrix and the correlations ordinary least square method of regression has been used for the analysis.Histogramof exchange rate show rupees value against U.S dollar are continuously decrease. FDI is also not good, Gross domestic product (GDP) of the Pakistan is also very low trade,In histogram also represent the trade volume (TV) in which imports of Pakistan is very high while export is low. Scatter plot show the positive relationship dependent and independent variables except trade volume. So its result shows if the government working on these variables then trade deficit should automatically decrease like 2003 and 2004 in which our export are more as compare to import .correlation coefficient of trade deficit with gross domestic product, foreign direct investment, exchange rate has shown the moderate correlation except trade volume Keywords: EFFECT ; TRADE DEFICIT ; ECONOMY OF PAKISTAN 1. Introduction 1.1 Background Pakistan is one of those countries who are facing trade deficit from last many years. Pakistan was facing trade deficit in financial year (FY) 1957-58. Foreign trade sector...
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...Foreign Direct Investment in the Indian Telecommunications Sector By Keith Green Abstract This paper will examine the current status of foreign direct investment (FDI) in the Indian telecommunications sector and the issues facing foreign companies seeking to invest in the Indian telecommunications sector. The paper concludes with a brief econometric examination of the factors influencing the level of FDI in the Indian telecommunications sector. Introduction In the early 1990s India began to open up an economy that was previously closed to foreign direct investment (FDI). The liberalization in India included the gradual granting of authority for foreign direct investment in specific sectors of the economy. India has received significant inflows of foreign direct investment after liberalizing its economy in 1991 (see Figure 1 in the appendix). FDI inflows to India have exceeded many other ASEAN countries over time. However, China, not depicted in Figure 1, continues to be the leading destination for FDI in the Asia-Pacific region. India has achieved substantive improvements in telecommunications access since opening its telecommunications sector in the early 1990s. However, India has realized fewer benefits than were possible during the period of market reform. The slow implementation pace of liberalization, disparity between urban and rural areas and unclear regulations have impeded the flow of investment to the telecommunications sector in comparison to other emerging market...
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...EXCEL International Journal of Multidisciplinary Management Studies Vol.2 Issue 1, January 2012, ISSN 2249 8834 Online available at http://zenithresearch.org.in/ AN OVERVIEW OF FOREIGN DIRECT INVESTMENT IN INDIA SYED AZHAR*; K.N.MARIMUTHU** *Research Scholars, School of Management Studies, University of Hyderabad, AndhraPradesh-500046. ABSTRACT This paper attempted to make an analysis of FDI in India and its impact on growth. It also focuses on the determinants and needs of FDI, year-wise analysis, sectoral analysis and sources of FDI and reasons. One of the economic aspects of globalization is the fact that increasing investments in the form of foreign direct investments. In the recent times due to the global recession most of the countries have not been able to pull investments. India has been able to attract better FDI’s than the developed countries even during the crisis period also. Especially in the recent years the FDI in India has been following a positive growth rate. Since 1991 the government has focused on liberalization of policies to welcome foreign direct investments. These investments have been a key driver for accelerating the economic growth through technology transfer, employment generation, and improved access to managerial expertise, global capital, product markets and distribution network. FDI in India has enabled to achieve a certain degree of financial stability; growth and development to sustain and compete in the global economy...
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...of US Foreign Policy: An Overview Hang Thi Thuy Nguyen1 1 The Royal Melbourne Institute of Technology, Australia Correspondence: Hang Thi Thuy Nguyen, School of Global, Urban and Social Science, The Royal Melbourne Institute of Technology, Australia. E-mail: thuyhang032003@gmail.com Received: July 27, 2013 doi:10.5430/wjss.v1n1p20 Accepted: August 12, 2013 Online Published: August 13, 2013 URL: http://dx.doi.org/10.5430/wjss.v1n1p20 Abstract This article reviews major theoretical perspectives to US foreign policy as well as on how these theoretical perspectives explain foreign policy decision making and conducting of the US. First, the paper will discuss the process of making foreign policy to sustain US core values and interests which are determined by five major categories of sources (i) the external environment, (ii) the societal environment of the nation, (iii) the governmental setting, (iv) the roles of foreign policymakers, and (v) the individual personalities of foreign policy-making elites (Wittkopf et al 2008, p. 15). Then, the paper will examine the defensive and offensive realism, liberalism, marxism, neoclassical realism, constructivism which can be based on to understand US foreign policy behaviour. It will be concluded that no single theory has the capacity to describe, explain and predict US foreign policy behaviour. A mixture of such theoretical approaches seems to be necessary to obtain a comprehensive picture of US foreign policy...
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...International Monetary Fund (IMF) defined Foreign Direct Investment (FDI) as “ an incorporated or unincorporated enterprise in which a foreign investor owns 10% or more of the ordinary shares or voting power of an incorporated enterprise or the equivalent of an unincorporated enterprise”. (IMF, 2004). Gilomore, O’s Donnel, Carson and Cummins (2003) stated, “There are eight factors that are influencing the choice of host market in terms of FDI. They are knowledge and experience of foreign market, size and growth of the foreign market, government emphasis on FDI and financial incentives, economic policy, transportation material and labor cost, availability of resources, technology and political stability.” Since 1970s FDI inflows increased in Malaysia reaching its peak around the 1990s and since then fluctuating and recently experiencing outflows of foreign funds. (TheGlobalEconomy, 2016). The objective of this essay is to discuss factors influencing a decrease in FDI in Malaysia. Slow economic growth is one of the factors that have affected FDI in Malaysia. According to Hill, Cronk & Wickramasekera (2013), “Economic growth is an increase in the productive capacity and national output of a country, measured by the rate of increase of GDP”. China being Malaysia’s second biggest export market after Singapore has a direct impact on the Malaysian economy. (Hui, 2014). Because of a lower economic growth in China, demand for Malaysian goods and services have declined in the...
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...competitiveness of Korea and Singapore H. Chang Moona,*, Alan M. Rugmanb, Alain Verbekec a Graduate Institute for International & Area Studies, Seoul National University, Seoul 151–742, South Korea b Templeton College, University of Oxford, Oxford OX1 5NY, UK c Solvay Business School, University of Brussels (V.U.B.), Brussels, Belgium Abstract Globalization is very important for small economies such as Korea and Singapore. The single diamond model (Porter, 1990, The competitive advantage of nations) suggests some important determinants for a nation’s global competitiveness. However, this model is incomplete, mainly because it does not incorporate multinational activities. A new approach, the generalized double diamond model (Moon et al., 1995, in Research in global strategic management: Volume 5: Beyond the diamond) offers some important extensions to Porter’s original model. To test the validity of these two models this paper evaluates relevant data for both domestic and international variables in the case of Korea and Singapore. The results generally support the generalized double diamond model © 1998 Elsevier Science Ltd. All rights reserved. Keywords: International competitiveness; Double diamond; Porter’s single diamond; Korea; Singapore; Small open economies 1. Introduction In his famous book, The competitive advantage of nations, Porter (1990) studied eight developed countries and two newly industrialized countries (NICs). The latter two are Korea and Singapore. Porter is...
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...QUESTION 1 Explain why the study of macroeconomics is important in making business decisions. Macroeconomics is the study of the economy as a whole. It is the study of the aggregate demand and aggregate supply which reflect the demand and supply of everybody in the whole country. It examines the activities and trends in economy’s wide phenomena, such as unemployment, inflation, economic growth, money supply, budget deficits, and exchange rates. The knowledge from this study will indicate the ‘health’ condition of economy in the country. As a business owner, the study of the macroeconomics is very important to make everyday business decisions as they have to focus beyond what is happening in the firm and look into aggregate demand and aggregate supply in economy. Managers always need information or knowledge to make decisions. Example is demand theory. If people get low income, they tend to spend less than when they are getting higher income. As the managers are forecasting the demand for their products and services, anticipation of how consumers’ incomes will grow should be learned. To make decisions, business owner should also know about the current interest rates for loans if they are about to borrow money from the financial institution. They should also be aware about where they stand in the business cycle. Cost of labour is another important reason to study of macroeconomic in order to make better decision. For example, during tight labour supply, the price or...
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...Economic Environment This Unit covers the second of the PESTLE elements LEARNING OUTCOMES The application of trade theory to explain the benefits of engaging in International Trade Economic Implications of a country’s membership of a trading bloc for a business Compare the various types of Foreign Direct Investment (FDI) and analyze how they may affect the various countries involved as well as the businesses within these countries INTERNATIONAL TRADE THEORY Four Theories of International Trade are: Absolute Advantage Product Life-cycle Theory New Trade Theory Porter’s determinants of National Competitive Advantage MERCANTILIST THEORY States that nations should accumulate financial wealth, usually in the form of gold, by encouraging exports and discouraging imports. Aim is to maximize exports and minimize imports. Rest on the idea that if one country gained, then another must lose. MERCANTILIST THEORY Problems : This theory excludes the fact that in some cases it is good to import. By discouraging import the population will have to do without certain consumer items. ABSOLUTE ADVANTAGE This concept is generally attributed to Adam Smith . Refers to the ability of a country/firm to produce greater output of a good or service than other countries/firms using the same amount of resources. Smith argued that a country should specialize in producing those goods/services for which it has an absolute advantage. Countries would benefit/gain...
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