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Foreign Direct Investment as a Source of Economic Growth - Coursework Example

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The paper "Foreign Direct Investment as a Source of Economic Growth" discusses that when the local firms start to fear the foreign firms, and so want to provide better products and services, thereby compete with them, they will surely optimize its operations to maintain the hold or market share. …
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Foreign Direct Investment as a Source of Economic Growth
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Download file to see previous pages Foreign Direct Investment (FDI) is one of the key catalysts for globalization and the resultant economic growth that is visible in many countries. However, if viewed from another perspective, it appears that globalization and the globalization friendly policies of many countries only pushed the companies to initiate FDIs in various territories. So, when viewed from an overall perspective, it is clear that both, globalization and FDI are correlated, with one acting as the catalyst for other, and vice versa.
Globalization during the last few years has been witnessed by a massive jump in the total quantum of FDI. The extent of increase in FDI might be placed in proper perspective when one understands that between the years 1980 and 1995 there was a four-fold increase in the total amount of FDI worldwide. If one examines the geographical origins and destinations of these FDIs, one discovers that most FDI tends to originate in United States, Japan, Germany, the United Kingdom, France, the Netherlands, Sweden and Switzerland. So, a significant benefit of these total annual FDIs is directed at these industrialized countries rather than at the economies of the Third World. (Castells). However, this bias towards industrialized countries has started tilting towards the Third World countries during the first few years of the twenty-first century as one learns that in 2004, for instance, FDI inflows into the developing economies represented about 36 percent of aggregate global FDI inflows. (UNCTAD). Thus, a strong trend has been the number of service MNCs’ globalizing their operations through FDI, with major activities in FDI visible at the turn of the century (Dunning 1989). Statistically, ‘the world’s inward stock of services FDI quadrupled between 1990 and 2002, from an estimated $950 billion to over $4 trillion’ (UNCTAD). However, FDIs have not been flowing equitably in all the Third World countries, as 80% of FDI inflow into the Third World countries is directed towards only 20 Third World countries among which China has been the largest Third World recipient of FDI for a number of years.  ...Download file to see next pagesRead More
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