...Lesser Developed Countries Over the past 30 years foreign direct investment has been a major contributor to economic growth across the globe. FDI inflows reached an all-time high in 2007 at $1.8 trillion with approximately 40% of that amount being invested in less developed countries. The prediction of this inflow into less developed countries was that it would be a wholly positive thing for the host country through resource transfer effects, employment effects, and effects on competition domestically and balance of payments. In the case of developed nations and even those in the upper tier of less developed nations this can be true but for the poorest of the less developed nations this has not been the case. In this essay we will examine why FDI has failed these nations and what can be done going forward to improve the economies of less developed nations by better utilizing FDI. To understand why FDI is not working in these less developed nations we must look at what are believed to be the fundamental effects of FDI on any host country. These effects include the increase in employment opportunities within the host country. They also include resource transfer effects whereby the skills and knowledge of the MNC are transferred to the host country. It is also expected that competition from MNC in domestic markets will force domestic companies to work more effectively to compete and thereby make these companies more effective in competing internationally. Lastly, FDI can increase the...
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...A-International Trade theory 1-Mercantilism Thomas Mun (17th century) stated that foreign trade was only beneficial if a country “sells more to strangers yearly than we consume of theirs in value” 2-Absolute advantage (1776, Adam Smith) The ability of a country to produce a product with fewer inputs than another country 3-Comparative advantage (1817, David Ricardo) The notion that although a country may produce both products more cheaply than another country, it is relatively better at producing one product than the other 4-Product life cycle theory A product life cycle refers to the time period between the launch of a product into the market till it is finally withdrawn from it. In a nut shell, product life cycle or PLC is an odyssey from new and innovative to old and outdated! This cycle is split into four different stages which encompass the product's journey from its entry to exit from the market. This theory suggest that products pass through a four-stage cycle: 1- Introduction 2- Growth 3- Maturity 4- Decline 5-New trade theory Free trade implies specialization and requires that nations neither artificially limit imports nor artificially promote exports. It suggested that it might benefit countries with an advantage in producing certain goods to initially protect the trade of such goods. By doing so, the economic advantage for the producing company might be more greatly realized, especially in the future. 6-Porter’s determinants of...
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...management of an organization to perform the analysis of operational facilities and financial facilities in a country. It helps the management to make an effective decision in invest in a venture to expand its business operation. The analysis also helps to reduce some risk that may affect the business operation. Venture The management of the organization is seeking towards facilitating its business in a new uncharted territory. The new venture may be the expansion of current product line or a new product or service. The management of the company is seeking to adjust with the growing demand in Brazil by building a new Caterpillar factory in it. The company doesn’t have information about the operational, financial and capital position in Brazil that may cause an increase in the uncertainties for the business. The organization has a leading position that will be effective tom provide unique advantages to it that is not available for the rivals maintaining purely domestic operations. In the new venture, the management may shift its value chain activities across its operation networks to eliminate the impact of exchange rate fluctuations, or change in market or product factors. The building of a new caterpillar factory in Brazil would shift its operational and value chain activities. The company has different types of switching options to operate its business in the foreign countries (Tong & Reuer, 2007). The foreign direct investment is the technique that would be used to undertake the...
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...TABLE OF CONTENTS LIST OF ABBREVIATIONS 3 INTRODUCTION 5 OUTWARD FDI 6 INWARD FDI 7 IMPORTANCE OF FDI 8 OVERVIEW OF MAURITIAN ECONOMIC PERFORMANCE 9 BOARD OF INVESTMENT 10 INCENTIVES ADOPTED BY THE GOVERNMENT OF MAURITIUS TO PROMOTE FDI 10 INVESTMENT POLICIES 10 1. LEGISLATION 11 Law Practitioners Act 12 Companies Act 12 Public Procurement Act 13 Competition Act 13 Trade and Investment Framework Agreement 13 Employments Rights Act and Employment Relations Act 14 Financial Services Act 14 Securities Act 14 Insolvency Act 14 Other investment incentives 15 TRIPS Agreement 15 2. Fiscal policy 16 3. LIBERALISATIONAND DIVERSIFICATION 17 4. MACROECONOMIC STABILITY 19 Social and political stability 19 Exchange Control 20 Inflation control 20 5. FINANCIAL SERVICES 20 6. INVESTMENT FACILITATION 26 7. LABOUR MARKET REFORM 27 8. INFRASTRUCTURE 27 Transport 28 Telecommunication network 28 Building Premises 29 TOP SECTORS ATTRACTING FDI IN MAURITIUS 30 FINANCIAL HUB 31 REAL ESTATE ACTIVITY 31 INFORMATION TECHNOLOGY AND OUTSOURCING SERVICES 32 MANUFACTURING SECTOR 33 SEAFOODS HUB 34 TOURISM SECTOR 35 THE TWO RECENTLY SECTORS WHICH ARE EXPECTED TO GROW AND DEVELOP: 36 KNOWLEDGE HUB 36 MEDICAL 37 FDI EVOLUTION MAURITIUS 38 SPECIAL CONSTRAINTS AND CHALLENGES 41 SUCCESSES AND CHALLENGES 42 THE ECONOMIC FUTURE OF MAURITIUS 43 ...
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...activity is the term “satisfaction.” It is crucial that the participants in international business are satisfied. Only if they feel they are better off after the transaction than they were before, will individual business transactions develop into a business relationship. The fact that the transactions are across national borders highlights a key difference between domestic and international business. The international executive is subject to a new set of macro environmental factors, to different constraints, and to quite frequent conflicts resulting from different laws, cultures, and societies. The basic principles of business are still relevant, but their application, complexity, and intensity vary substantially. Area of study within this topic include differences in legal systems, political systems, economic policy, language, accounting standards, labor standards, living standards, environment standards, local culture, corporate culture, foreign exchange market, tariffs, import and export regulations, trade agreements, climate education and many more topics. Each of these factors requires significant changes in how individual business units operate from one country to the next. Importance of this topic: Still Bangladesh is a developing country, we are...
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...Successful FDI Brenda’s Fine Furniture is a very successful and becoming a household name around the Unites States and in foreign countries because of the innovative and creative structure that suits families and businesses. The furniture gives customers the ability to be elaborate in small dwellings as well as large ones. Many European countries are impressed with the western styles. It has been determined by this company that it would be beneficial to become global. In order to Brenda’s Fine Furniture can enter the Europe market through FDI. The multinational enterprise can invest directly in the production or other facilities in Europe over which has effective control. Manufacturing FDI requires an establishment of production facilities in Europe. Horizontal FDI approach would be use because the same product (furniture) produce in the U.S. will be produce in Europe. This represents a geographical diversification of the MNE domestic product line. Sharing experiences, resources, and knowledge can be shared to reduce risk and cost. Horizontal FDI enables a MNE to quickly establish its competitive advantage in the host country because a company’s key competencies are more transferable. According to Journal of US-China Public Administration (2010), there are relatively specific advantages within given industries between developed countries are exchanged in horizontal or intra-industry. Most FDI is horizontal. In order for the new MNE furniture to benefit...
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...International Business Environment in India | Brief Analysis | * Sankeerth Reddy * Suveer Neelam * S Kishore | Introduction India is the largest democracy in the world and geographically 7th largest in the world. It is also one of the best countries for international trade. India is developing at a great pace and also has a proud and rich culture. The Census Bureau of USA projected that by 2025 India will be the largest populated country surpassing China. With majority of the population being in the age group of 20-30 years, India has good educated and highly productive work force which enables a significant edge over the rest of the developing countries India relatively has lower percentage of senior citizens than its competitors like U.S and China further reducing the social expenditure for the elderly. India has a lot of natural resources. Iron ore, manganese, titanium ore, mica, petroleum, natural gas, diamond and limestone are some of the abundant natural resources. The coal reserves in India are the fourth largest in the world. 48% of India’s land is arable. Hindi is the most spoken and English is the official language facilitating transactions with other countries. Culture of India India considers religion as important part of its culture. It is to be respected and given importance to succeed in conducting businesses in India. The Indians talk about punctuality but not everyone practices. It is better if appointments are made in advance...
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...DIRECT INVESTMENT (FDI) Resource Transfer a) Capital Inflow Multinational companies that are able to do FDI usually have big funds. This might be because big multinational companies have good reputation to get loan from bank, compared to the local companies. With the inflow of capital into the host country, it will help the state to build better infrastructure, develop competitiveness in the industry, and boost the economy. b) Technology Transfer In any nation, the importance of technology is very important as it transfers to the growth of economy. Whenever FDI takes place, technology is transferred from the home country to the host country. It may be in form of machine transfer or knowledge transfer. For example in Malaysia, Proton collaborates with Lotus, and the technology of manufacturing car is transferred although it is not 100%. The vehicle manufacturing technology also help other Malaysian industry like rubber industry in making tires. c) Managerial Skills Transfer Management know-how is required through FDI process gives important benefit to the host county. Local employees hired by MNC are exposed to latest management skills that will improve the efficiency of operations in the host country. When foreign managers leave the firm, the trained local personnel will help to build indigenous firms, causing a beneficial spin-off effect to the host country. Employment Effect FDI brings more beneficial employment prospects to the host country by creating jobs...
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...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. KEYWORDS: FDI, GDP, Growth & Development & Indian Economy. ___________________________________________________________________________ INTRODUCTION South Asian countries such as china have implemented open door policies during 1980’s but India liberalized its policies in 1991. Before...
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...estate activities at 37 percent, followed by Abuja with 22 percent and Port Harcourt (Rivers State) with 6 percent, all covering 65 percent of real estate activities in the country. The trio, often regarded as Nigeria’s traditional cities, have seen increased tempo of activity in real estate development and much of the investments that have gone into real estate in the country in the last decade were concentrated in these cities. Nigeria’s has a burgeoning real estate sector, which by the GDP rebasing exercise in the country in April 2014, was discovered to be the fastest growing and sixth largest sector in the Nigerian economy, explaining the rising level of investment in the sector by both local and foreign investors. Foreign direct investment (FDI) is defined as “an investment in which a firm acquires a substantial controlling interest in a foreign firm (above 10 percent share) or sets up a subsidiary in a foreign country” (Chen, 2000). The International Monetary Fund adds “the investor’s purpose is to have an effective voice in the management of the enterprise”. FDI is not only a financial transaction between two foreign enterprises, in which one company invests in the capital of the other one. This transaction gives to the investor lasting management of the company and a direct control over assets. FDI investors take in whole or in part the control of the...
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...As globalization occurs, national economies develop an interdependence with one another to continue to grow. One example of the interdependence between two countries is the Foreign Direct Investment (FDI). A FDI is an investment made over international borders that seeks to achieve an enduring enterprise in the host country. Paraguay is a potential destination for FDIs from US investors, but risk is evident. This paper will discuss a business proposition for a FDI in Paraguay and provide three reasons for this investment. Prior to the business proposition, the general background of Paraguay will be given. The Republic of Paraguay is a relatively small country (157,047 sq. mi.) that is about the size of California with a population of 6.46 million. It is located in South America and landlocked between Bolivia, Brazil, and Argentina. The major nature resources consist of hydroelectric energy, timber, iron ore, and manganese. Agriculture drives the market economy that is overwhelming informal. This leaves the Gross National Income (GNI) per capita based on Purchasing Power Parity (PPP) at a low $3,290.00US. The country mainly exports is agricultural products, soy beans, sugar, and beef, to Uruguay, Brazil, and Argentina. Hydropower is also exported as the country continuously has a surplus. This leads to major imports of machinery, electric machinery, and motor vehicles/tractors from China, United States, and Brazil. Currently, Paraguay is seeking re-admittance to the...
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...PROJECT PROPOSAL On Foreign Direct Investment (FDI) PROBLEMS AND PROSPECTS OF FOREIGN DIRECT INVESTMENTS IN BANGLADESH Prepared For Md. Sujahangir Kobir Sarkar Lecturer Department of Agricultural Economics & Rural Development Faculty of Business Administration and Management Patuakhali Science and Technology University Prepared By Ashfaqur Rahman Level - II , Semester - II Roll : 039 , Reg. : 01567 Session : 2007-2008 Faculty of Business Administration & Management PATUAKHALI SCIENCE & TECHNNOLOGY UNIVERSITY Date of Submission: April 30, 2010 TABLE OF CONTENTS 1. Background Information of the Project. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2. Statement of Project Problem . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 4 3. Objectives of the Project. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 4. Justification of the Project . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 5. Benefits of the Project . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .....5 6. Methodology of the Project. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6 7. Reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...
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...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 if they export only those good/services in which they have an absolute advantage and import those in which other countries have an absolute advantage. ABSOLUTE ADVANTAGE Example ABSOLUTE ADVANTAGE Example ABSOLUTE ADVANTAGE ...
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...Oligopolistic Reaction Theory P. 6 5.0 Conclusion P. 6 6.0 Bibliography P. 7-8 7.0 Appendices P. 9-11 1.0 Abstract Foreign Direct Investment has seen extensive growth globally in the past quarter century and numerous studies have attempted to address the question of why firms choose to enter foreign markets via this method. FDI is an important aspect of developing economies with China seeing some of the highest investment rates. The report takes the example of Volkswagen who were the first automobile company to engage in FDI in China and have seen excellent growth there over the years. It has found no one theory can be applied and many elements must be considered when looking at why an individual firm chooses to internationalize through FDI. 2.0 Introduction Foreign Direct Investment (FDI) has become an increasingly important area of study within International Business as rates of investment continue to grow significantly across the globe. FDI is an important aspect of economic growth for a country, in particular in the developing economies. China has been particularly attractive in the past 30 years...
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