Costs and Benefits of Foreign Direct Investment for New Zealand

3428 WordsMar 27, 200714 Pages
New Zealand – Report 1.0 Introduction Throughout the production of this report I will aim to explain an analysis of the costs and benefits of foreign direct investment for New Zealand both in theoretical and empirical terms. When it comes to defining FDI different countries may define it differently and because of this it is arbitrary, but foreign direct investment can be described as: "Foreign Direct Investment is the purchase by the investors or corporations of one country of non-financial assets in another country. This involves a flow of capital from one country to another to build a factory, purchase a business or buy real estate." (http://www.afsc.org/trade-matters/learn-about/glossary.htm). In New Zealand foreign direct…show more content…
During this period there was also a reduction in the flow of outward stocks, 1995 sore them stand at 7,630 as a percentage of gross domestic product, while in 2000 they had decreased to 7,229 again quite a significant drop. In 2001 though the FDI inflows in the New Zealand economy had a very sharp increase compared to that of previous years, this rise is quite abnormal as if so far unaccounted for. Throughout the history of foreign direct investment in New Zealand there has been 3 main cycles, in 1840 foreign direct investment was aimed at expanding the current production levels of the country, from 1938 up until 1984 F.D.I was geared towards the domestic market with foreign firms operating in an extremely protected environment and the third cycle which is past 1984 is when F.D.I became dominated by the sale of state-owned assets, due to this most foreign direct investment has been focused on the domestic economy. The following table shows how heavily the New Zealand economy relies on foreign direct investment, this table was taken from www.unctad.org The above graph shows foreign direct investment in investment capital formation, the left hand section of the graph compares the Tran nationality index of host economies (%) in 1997 of the developed countries in the world, while the right hand section shows exactly the same but for the developing countries of the world. As you can clearly see New Zealand is a developed country and compared to all the
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