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relationship between economic growth and development
relationship between economic growth and development
relationship between economic growth and social developement
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The link between economic growth and human development has been a subject of rigorous empirical econometric work since the 1970s. Foreign Direct Investment (FDI), which is an important component of human development especially in modern regional and global economies, has been found to explain varying levels of return and economic growth.
Foreign Direct Investment is a major source of capital for most developed and developing countries. It is usually difficult for countries to generate capital through domestic savings and based on their domestic strengths and capacities alone. It is even more difficult to import up-to date technology from abroad taking into consideration issues of transportation and the technical expertise required for operation,
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Tanzania has made considerable efforts over past three decade to improve investment climate with the vision to attract more FDI, whereby to this extent major policy and structural reforms were carried out since mid of 1980s in order to transform/improve business and investment environment in the country. One of the efforts that have been done is that Tanzania has been able to set up several autonomous government institutions and authorities to attract FDI inflows in the country. For instance in 1990s the government set up special authority Investment Promotion Centre (IPC), although after seven years the authority failed to attract FDI to the level that was predicted. Despite the challenges, but the country had made some improvements through IPC with respect to the development of private sectors in which the annual FDI value reached about USD 148.50 million. Due to the failure of IPC to attract more FDI into the country then the government decided to transform the authority into more aggressive institution so that it can attract more FDIs inflow into the …show more content…
Furthermore, the relative importance of FDI determinants may change over time, for instance due to globalization. Factors that have been brought out as determinants of FDI in developing countries include political and macroeconomic stability, infrastructure quality, governance, regulatory environment openness to trade and investment promotion strategies (UNCTAD, 1998). However, it is important to note that even though these factors have been empirically proven to be FDI determinants, some determinants may apply to some regions but not others. For instance, on average, countries in Sub-Sahara Africa (SSA) receive less FDI than other regions by virtue of their geographical location (Asiedu, 2002). However, it is important to note that even when factors apply to a particular region, they may not be applicable to a specific country within that
To begin with, this research exposed a FDI puzzle between India and China through analyzing the current economic condition. Prime, Subrahmanyam and Lin (2011) stated, "Given their growth records, large markets, and reformed economic systems, both China and India appear to be equally likely candidates for foreign direct investment. Yet, China has received substantially more FDI" (p. 303).
I found this article "Foreign direct investment: Companies rush in with the cash" on the financial times website (www.FT.com) published December 11, 2002 written by John Thornhill. The reason for choosing this article is my personal interest in the Chinese economy and its attractiveness to the foreign investors. Apart from the foreign direct investment this topic has also helped me in understanding the impact of Chinese economy on the global market.
Political and legal considerations were given first priority in this analysis with primary emphasis given to whether a country's legal or political system prohibits or impedes foreign investment. If a country's political or legal system discouraged or prevented foreign investment, that country was disqualified from further consideration. Factors considered when assessing the political and legal environment:
In the year 2007, China and India ranked first and second respectively in the list of ideal foreign direct investment (FDI) destinations, according to A T Kearney, a global strategic management consulting firm (The Press Trust of India Limited, 2007a). The two nations, because of their similarities in geopolitical, economic and demographic aspects, are often compared with each other. To determine which one is more attractive for businesses to expand to, this essay will examine the business environment of both countries from the following perspectives: political/legal, economic, socio-cultural and technological.
In conclusion, Ireland is favorable country for FDI regarding its markets, resources, knowledge, efficiency, security and foreign trade opportunities. Further, from the country’s attractiveness that integrated with its PESTEL proved that the benefits and control for foreign companies were able to overcome the risks and costs that they have to bear with. The fact that Ireland was also dragged by global economic recession in 2008 had drawn the country’s GDP and economy condition (The World Factbook, 2009). However, the country’s supports due to foreign investment and government commitment in its political-economy regulations are trusted to sustain Ireland in long-term performance.
By definition foreign direct investment is the acquisition of tangible assets such as machinery, land and factories; this type of investment are often between two companies- usually multinationals from different countries. FDI is one of the benefits of globalisation as it has a direct impact on aggregate demand having a follow on effect on technology, job opportunities and increased intellectual property owned by countries. In this essay I will discuss some of the factors that affect a country’s disposition to gaining foreign direct investment.
Figure 1 shows the recent trends in FDI inflows of some developing countries. According to the UNCTAD report of 2011 China has the highest FDI inflows among all the developing countries like Hong Kong, Russia, Singapore, Brazil and India; because China has introduced FDI over 20 years ago and has progressively pursued foreign investment while adjusting its FDI policies. Since 1993, China has attracted the largest amount of FDI of all developing countries while increasing its levels of both exports and technological advancement
FDI is typically regarded as a mode of cross-border inter-firm collaboration which connects with important equity stake and efficient power in managerial decision making in international enterprises (de Mello, 1999). FDI is also an external factor which boost Thailand’s economic growth through employment, transfer of technology and knowledge and relocating manufacturing facility. However, there is increasingly movement of production base into China and India instead of Thailand. As a result, the Thai
Foreign Direct Investment (FDI) measures the investment activities of MNCs, and it can be formally defined as "ownership of assets in one country by residents of another for purposes of controlling the use of those assets".
There are certain present conditions that lead to a strong positive impact of FDI upon economic growth. Two studies can be referred in this instance; Alfaro et al. (2003) in their research describe that for FDI to have major impact upon the economic growth of the host country, if the financial markets in the host country well developed. Countries that have well developed financial markets gain more from inflow of FDI than countries with weak financial
Human capital is one important factor in the process of economic growth. With high-quality human capital, economic performance is also believed to be better. These qualities can be seen from the level of education, health, or other indicators viz. Human development index. Human development plays an important role for economic growth of a country. In simple words, human development would imply a process of enlarging choices. But in addition it is also concerned with the outcomes of the concerned choices (Gupte, M., 2016). Human Development, described as the ultimate goal of the development process, with economic growth, described as an imperfect proxy for more general welfare, or as a means toward enhanced human development (Ranis,
The purpose of this essay is to demonstrate what are the main challenges of assessing the impact of FDI on economic development. In other words, we would like to comprehend why is it tough to assess that there is a positive relationship between FDI and economic development. While it is not necessary to recall the definition of an FDI and its different elements, it is worth defining economic development which is slightly different from economic growth. Indeed, the economic development includes economic growth but it is rather a process than a data. It contains components such as inequalities and poverty drop, public welfare, steady institutions. On the other hand, economic growth exclusively refers to the evolution of national income. As a matter of fact, theoretically, FDI is seen as a key factor
According to China history, foreign direct investments were appears and started in China when their governments diminished the isolation policy which has been adopted by China after 30 years. Following the defeat in the Chia-Wu war with Japan, China start to open their coastal city to foreign direct investor after signed the ‘treaty of Shimonoseki’ (Dunning & Narula, 1996, p.418). Their domestic markets were dramatically improved when China start to decentralize the corporate decision making and development of market mechanism. When China changes their economic system to open-door policy in 1978, foreign direct investment (FDI) in China was grown significantly in the Chinese economic system. China become a largest FDI recipient in developing world and globally and surpassed US with the FDI inflows of $36 billion, at the end of 2005, cumulative FDI was $622 billion (Kevin, 2006, p.2). In order to gain more knowledge and improvement of ideologies, China chooses FDI as the best way to growth of their economy rapidly. The most important benefits of FDI were their economy and industry improved because through FDI, China gain the foreign capital, use an advanced technology and skilful labour. This is because skilful labours are needed and important in the industry to produce worth and high quality output. As a result, FDI inflows includes 7% of gross capital formation, 21% foreign-invested enterprises (FIEs), 28% of industrial output produced by FIEs; and 57% China exports were also come from FIEs ( Kevin, 2006, p.2).
FDI inflow is divided into four (4) main sectors: agriculture, industries, infrastructure and tourism. FDI in the agricultural sector amounted to US $ 794.5 million in 2011, US $ 556.6 million in 2012 and a sharp increase of US $ 1,128.8 million in 2013. However, it started to decline of US $ 264.7 million in 2014 and US $ 482.6 million FDI flows in the infrastructure sector, which amounted for US $ 3,129.8 million in 2015 compared to the industrial sector, amounted for US $ 919.3 million and the tourism sector represents only US $ 111.9 million in
Sukar, A., Ahmed, S., & Hassan, S. (n.d.). THE EFFECTS OF FOREIGN DIRECT INVESTMENT ON ECONOMIC GROWTH. Southwestern Economic Review.