Essay On Fdi Inflows

Decent Essays

Critically discuss the changing pattern of FDI inflows in developed and developing economies by using appropriate international trade and investment theories Introduction For a country to be involved in Foreign Direct Investment (FDI) means that their resources participate in another countries business. Both people and technology can have an involvement in being transferred between two countries for the process of FDI. This is established by an investor which can be anything from a government body, a company or even an individual. When looking deeper into FDI over recent years (from 1980 onwards) patterns begin to develop globally and the financial crises tend to have a huge impact on FDI inflows in both developed and developing economies. …show more content…

However, when you look deeper into the peaks and troughs, it is clear that the FDI inflows has fluctuated drastically. The first real dip in the economy was caused by the recession in 1991. There was a multitude of issues worldwide which contributed to the recession such as the U.S. Federal reserves decision to raise interest rates in the late 1980’s and then Iraq’s invasion of Kuwait in 1990. These events consequently drove prices up of oil and decreased the confidence of consumers, which in turn led to the recession. Following on from this the global economy had to make a recovery. ‘Over the previous decade the SE Asian states of Thailand, Malaysia, Singapore, Indonesia, Hong Kong, and South Korea, had registered some of the most impressive economic growth rates in the world. Their economies had expanded by 6% to 9% per annum compounded, as measured by Gross Domestic Product. This Asian miracle, however, appeared to come to an abrupt end in late 1997 when in one country after another, local stock markets and currency markets imploded.’ (The Asian Financial Crisis, Charles W.L. Hill). Subsequently the developed economy benefitted excessively as investors were able to finance even more ventures which were at newly reduced prices. With the economy seriously thriving investors had a lot more money. In 1997 investors were excessively pleased with the progress of the internet and decided to

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