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The Political Aspect of the Netherlands with regard to Foreign Direct Investment Attractiveness - Coursework Example

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The central focus of this paper is the political aspect of the Netherlands with regard to Foreign Direct Investment attractiveness. Investment is an essential undertaking in any given economy. Countries inter-relate through investment within and without their regional settings…
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The Political Aspect of the Netherlands with regard to Foreign Direct Investment Attractiveness
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Download file to see previous pages Netherlands is a strong and favorable FDI destination in the European economies. The U.S is a primary foreign direct investor in the Netherlands among other countries. On the same note, the Netherlands also invests in other countries, thereby undertaking an outward FDI. Individuals, firms, and governments engage in FDI activities around the world, with high sensitivity being accorded to political systems and governance of the specific FDI destinations. This process encompasses strategic decision making, aided by PESTLE (Political, Economic, Sociological, Technological, Legal and Environmental factors) analysis and Porter's five Diamond model. These factors provide the environment of business undertakings in the FDI context, with the Diamond model evaluating the competitive advantage of a nation in a given business aspect.
The attractiveness of FDI in the Netherlands is not only based on the political stability of the country over time, but also on social and economic pillars that promote FDI. These pillars are used in this paper to explain the attractiveness of FDI in the Netherlands, but a lot of emphases are accorded to the Netherlands’ political and governance stability. The four attributes of the Diamond model are employed to present the Netherlands as a suitable FDI destination, with a significant emphasis on the Netherlands’ political environment. The political aspect of the Netherlands is, therefore, the central focus of this paper, with regard to FDI attractiveness.
FDI destinations are critically scrutinized in a bid to alleviate the risk of failure. An economy that is characterized by effective governance systems attracts high levels of inward FDI and encourages its investors to engage in outward FDI in similar economies. Such a political environment is business-friendly and it is often characterized by low corruption practices and fair and healthy competition in business (Holland Gateway, 2011). Unstable governments drive away inward FDI due to the prevalence of an environment that is highly characterized by investment risks. Other determining factors of FDI include: legal systems (Baltzer, 2008, p.81; Markusen, 2002, p.67), economic context (OECD, 2002a), foreign relations (Breuss, 2002, pg.245-274), infrastructure and technology (Angeloni, Flad and Mongelli, 2007, pg. 367-409) and social and cultural factors (Roland, 2005, Ch. 3; Roland, 2009; Darvas and Szapáry, 2008, pg. 44).
The Netherlands is an investment destination for many foreign individuals, firms and governments. The United States has for a long time been a major FDI player in the Netherlands. In fact, the U.S has at one time accounted for up to 13.3% of total outbound investment in the Netherlands (Encyclopedia of the Nations, 2012). This scenario has been accounted for by a fiscal climate that favors high-level investments and international orientation that boosts business undertakings between the Netherlands and the rest of the world. The U.K and Canada join the U.S to make the top three countries that actively engage in inward FDI in the Netherlands. There are a number of factors and aspects that make the Netherlands an attractive destination for FDI. The economic context, financial system, and the political economy in the Netherlands are the most influential factors when it comes to attracting FDI in the country (OECD, 2002b). ...Download file to see next pages Read More
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