FDI

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CHAPTER 2: LITERATURE REVIEW

FDI and economic growth

In the recent and extensive expansion of foreign direct investment (FDI) worldwide, some developments reflect a significant change in the landscape of FDI. The most notable is the significant increase in investment by transnational corporations (TNCs) from developing countries. (Wang 2007, 32) This phenomenon reflects profound changes in the economy internationally, especially since developing countries are becoming increasing proportion of production, trade and global investment. In the Section II of this note reviews some key issues raised this phenomenon, particularly its impact on policy and South-South cooperation. (Auty 2001, 27)

Effects of FDI

Another Significantly, FDI trends in recent years, partly related with the rise of TNCs from developing countries has been the rapid growth FDI in natural resources and related industries. This has been due to high demand raw materials (especially arising from increased demand from fast-growing emerging economies) as well as the emergence of new potentially profitable opportunities in the primary sector with increasing the scope and speed of globalization, distances between countries is becoming smaller. (Lal & Myint 1996, 29) There is no longer the priority of investing in geographically close countries. This situation means that the range of countries receptors become more extensive investment. Investors are becoming more options for managing its capital, which causes are becoming more selective. (Smarzynska 2002, 2923) Assumptions than in previous decades determined the course of investment, now is not so important.  It must weighed many economic and social factors to decide to send not only capital to a country but also their skilled personnel. (Gorg & Greenaway 2002, 28)

FDI, Corruption and natural resources

Today "is considered the most corrupt economies are likely to experience financial crisis, as there is a greater likelihood that rely on short-term foreign loans, capital over probably leave the country in case of a shock ". This situation also negatively affects portfolio investment, because investors prefer to allocate their funds to less corrupt countries. In addition, countries developed countries have chosen to discourage investment in countries with high levels corruption. (Kaufmann & Wei 1999, 17)

 FDI flows have an unprecedented international dynamics of globalization with the transformation of transnational corporations and new forms cyclical accumulation. Recorded two falls in the first decade of this century, after the maximum mo reached in 2000 with 1,392,957 million, 86.5% focused on developed countries in Latin America, the peak occurred in the previous year, 8.3% of total. By the crisis empresas.com FDI flows fall to record a minimum in 2003 they accounted ...