International Trade And Economic Development - Research Paper Example

When it comes to global business, Foreign Direct Investment (FDI) is an extremely integral option as it automatically throws up newer marketing channels and markets, provides access to newer technologies, and decreases production costs, besides providing new products, skills, and finance options. FDI has indeed been the catalyst for the global economy that we witness currently – this is one of the main reasons for the ‘internationalization’ of business across the world. Over the years, the concept of FDI has steadily evolved to mean more than just the physical investment of a company in one country in a company situated in another1. Today, FDI has grown to encompass direct and actual possession and acquisition of a firm on foreign soil or could be indirect through a strategic alliance, joint venture, investment, technology transfer, or with the licensing of Intellectual Property (IP). There has been growth in terms of the size, scope, and method of FDI. The immense change that we have witnessed in the areas of global trade and investment policies and the shift of most nations in the world towards an economy that whole-heartedly focuses on liberalization, the deregulation and privatization of industries, and more accommodative regulatory policies, have all led to increased FDI worldwide.

Developing countries have felt the impact of FDI in a major fashion as their economies seek out investment from developed countries. It allows for strong economic development and the prospect for global foreign direct investment This definition appears in an article written by Jeffrey P. Graham and R. Barry Spaulding and originally appeared on the now-defunct Citibank international business portal. considered to be positive in the short and medium term2 . In a recent report released by World Bank3, 2009 will see a sharp slump of 31% or USD 180 billion due to the global recession. The same report states that in 2008, Foreign Direct Investment declined by 10% in the developing world with the economic slowdown. The jury is still out on whether FDI is beneficial or otherwise and the debate on this topic has been going on for a long time.