A Nation 's Economic Success And International Competitiveness

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A nation’s economic success and international competitiveness depends upon the policies it set. These policies are dependent on a variety of factors such as foreign direct investment and trade. According to Phillips et al (2006), the global financial platform has been showing transitional change over the last two decades in which foreign aid as a source of capital flow is drying up. Markusen and Venables (1998) explained that financial institutions like the IMF and the World Bank on their own are feeling the strains of meeting the financial demands of especially developing countries. In this respect, economic policy makers in governments of both developing and developed economies take great strides in attracting capital inflows…show more content…
FDI plays in the economic growth process of the host country. A good number of the studies and discussions show that there exists a strong correlation between FDI and economic progression. In addition to being an engine for diffusion of knowledge and transfer of technology, FDI also stimulates international trade, domestic investment, expands host nation 's domestic savings, and increases the host country 's foreign exchange reserves adjusting its Balance of Payment post. These factors increase the economic growth of the host nation. Exports are also regarded as a means of economic growth. They facilitate production of goods and services efficiently by exploiting and attaining a competitive advantage over other nations. The success stories of East and South East Asian countries such as Singapore and Malaysia suggest that foreign direct investment is a powerful tool to promote export for the host country. Grossman and Helpman (1993) explain that a number of investigations confirm that FDI through MNCs (multi-national corporations) offer greater merit over local companies in regard to export performance. These MNCs bring intangible assets such as technology, brand names, and skills, globally proven strategies in marketing, advertising strategies, and international
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