Foreign Direct Investment and Globalisation. Foreign Direct Investment (FDI) When is investment best defined as ‘direct?’ –When investment gives rise.

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Presentation transcript:

Foreign Direct Investment and Globalisation

Foreign Direct Investment (FDI) When is investment best defined as ‘direct?’ –When investment gives rise to foreign control of domestic assets –IMF- “…made to acquire a lasting interest in an enterprise where the investor has an effective voice in the mamagment of the company”

FDI- What Does it Offer? 1.Capital- long-term, risky investment 2.Market Access- export markets 3.Promote Export-led strategies of growth 4.Employment 5.Technology- transfers increase productivity 6.Spillovers and Linkages- introduction of more competitive environment and connections to local industry boost productivity and output of entire economy

Questions: 1) Describe the world trend in FDI inflow between 1980 and Use figure 1 2) How do the inflows and outflows compare in 2003 and Use figure 2. 3) Explain the role of TNCs in FDI.

Foreign Direct Investment in China - Presentations

What has FDI Done for China? Role in Economic Transformation-General –Established new industrial branches –Employment opportunities –Technological transfers –Technological and Managerial Skills Spillovers to domestic industry –International Trade- boosted immensely Export production by Foreign-Invested Enterprises –Increased from 1% in ’85 to 45% in ‘98

FIE-Led Export Growth Source: Lardy (1999) Source: Lardy (1999)

The FDI Boom in China In 2002 China was the #1 recipient of FDI worldwide GNP- FDI rose from 2% in ’92 to 5% in ’97 –FDI in S. Korea early ’90’s at.02% GNP What happened in the early 1990’s- specifically 1992?

The FDI Boom in China Source: China Business Review (Nov.-Dec. 2000) -Investment booms in the early 1990’s then retracts in the wake of the Asian financial crisis

Room for Improvement Despite huge FDI stock, PRC still far below other developing states in FDI per capita measurements –In 2000: Brazil received $195 per capita –China got only $30 per head-15% Brazil's –OECD states- highly developed-avg. $1,320.9 –Closest developing state is S. Africa $22.2 –Next highest per capita $54- Thailand * China still has far to go before achieving a developed status

Presentation tasks 1) Present the company and why it is a TNC. 2) When did the company started to invest in China? 3) What are its operation(s) in China? 4) The benefits. 5) The problems. 6) The future Pick your TNC!!! Motorola Novozymes, Hewlett-Packard, ABB, Ericsson, Microsoft, Kodak, Carrefour, Citigroup.

Pick your TNC!!! 1. Motorola 2. Novozymes 3. Hewlett-Packard 4. ABB 5. Ericsson 6. Microsoft 7. Kodak 8. Carrefour 9. Citigroup