The current global economic crisis has been labelled by economists as the worst economic crisis since the Great Depression and the domino effect of the crisis has culminated in the decline of consumer spending, demise of established businesses in key industry sectors and…
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Moreover, the global nature of the economic crisis has not only had a domino impact on national economies, infrastructure and the retail sector; it has also served as a barrier to quick recovery (United Nations, 2).
From a UK perspective, the current financial crisis has reiterated the importance of international trade and foreign direct investment (FDI) to the UK economy particularly in the current global economic downturn. Indeed, the fact that the UK is currently struggling in its recovery process is further testament to the UK reliance on FDI and international trade (Almond & Ferner: 58) The focus of this paper is to critically evaluate the importance of international trade and foreign direct investment to the lift the global economy out of the current downturn with specific reference to the UK. It is submitted at the outset that international trade and inward investment from FDI is a fundamental cornerstone of the UK economy as it is imperative to the sustainability of the economic strengths of the UK to compete in an increasingly competitive economy as a result of globalisation (Almond & Ferner 58).
This argument is further supported if we consider the rationale for the current financial crisis. It is submitted that the immediate trigger was the collapse of the US housing market as a result of the sub prime market disaster upon which the international banking industry had been lending through following trends in the housing market (Ambachtshee et al: 149). Indeed, the United Nations analysis of the global outlook for 2009 asserts that “in little over a year, the mid-2007 sub-prime mortgage debacle in the United States of America has developed into a global financial crisis and started to move the global economy into a recession” (United Nations 1).
Moreover, prior to the sub-prime catastrophe, the significant foreign direct investment in the US and liquidity of the US economy had
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In recent time, outward Foreign Direct investment has been significantly increased from China and India. Discuss the factors responsible for such a growth. Do you think International business theories (OLI and IDP) adequately explain the reasons for outward Foreign Direct investment?
The paper studies a number of broad ranging conceptual frameworks have been advanced that function as a means of articulating inflows of FDI. Democratic political structures have been demonstrated to be a major component of attracting foreign direct investment as such structures are more apt to stability and transparency.
FDI can also be defined as an investment of a company in a foreign country by building a factory within the host country. It is through a company’s direct investment in machinery, building and equipment in another country that foreign direct investment is made possible.
Inward FDI increased from 9.6% of GDP in 1990 to 26.7% in 2006. (Woodward, 2011). There has also been a recent flow of FDI towards developing economies and this has had a plethora of effects, both for home and host countries. (Raj and Sager, 2005). Foreign Direct Investment has over the last three decades aroused conflicting responses from the first and third world.
Some of these countries became full European Union (EU) members in May 2004. They also experienced a significant increase in foreign direct investment (FDI). As a consequence, the ratio of inward FDI stock to the 12 CEE countries studied here in total world inward FDI stock increased more than three-fold, from 0.81% in 1994 to 2.89% in 2004.
(Wikipedia, 2006). After the 1960's, foreign direct investments (FDI) have increased at a steady rate, with FDI stocks making up twenty percent of the world's Gross Domestic Product (GDP). Currently, China leads the world in foreign direct investments.
The author states that a multinational firm in a developed country may face higher labor costs and higher production costs when locating its subsidiaries in its own home country, while a shift overseas may involve a larger initial investment but is economically beneficial in the long run because the margin of profits are higher.
Vanhonacker (2000) suggested that foreign investor shareholding corporation (FISC) was the appropriate entry mode to the Chinese market as compared to joint venture or WOFE. FISC approach provides room for local partners in different locations of the country or product groups to have minor stake in business they surrender to the foreign investors.
ere are four defining features of FDI; transfer of capital, control of investment, source of funds for foreign operations and flow of balance of payments (Breifeld 1). Grimwade (125) lists three types of FDI; horizontal, where a firm locates the manufacture of the same product
rategies that enable entities to diversify its assets and risk across diverse countries by engaging in contractual agreements with multiple potential partners. Companies may find it advantageous by producing in foreign countries compared to exporting to those countries based on
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