Foreign Direct Investment Essay

Foreign Direct Investment Essay

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Foreign direct investment (FDI) is becoming a growing global trend undertaken by companies in order to expand their business into multiple countries as well as their domestic base. FDIs have increased across the world over the past 20 years, with outflows of US$241,863m in 1990 to US$2,171,384m in 2007, just before the global financial crisis, an increase of around 837% (OECD, 2014). This essay will look into why certain countries attract more foreign investment than others by looking at a variety of factors, including the growth rates of economies, access to natural resources, political stability, the risks of setting up in a country and more.
The World Economic Forum identifies there to be ’12 pillars of competitiveness’ for a country to be attractive to invest in. The basic requirements begin with the institutions, regarding the legal framework, government attitudes to the markets, regulation and corruption. Next is the infrastructure of the country. This includes a quality road network, rail, ports, airports, electricity supply and telecoms. Health and primary education are also basic requirements needed for a healthy workforce with a basic education. Along with economic stability, all of these are key requirements for a factor-driven economy. To enhance efficiency, higher education and training is necessary for the economy to move up the value chain. An efficient goods market allows for sophisticated customers and the ability to be competitive both domestically and internationally. The country must also have an efficient labour market, financial market and be technologically ready with access to information and communications technology. Along with a substantial market size, all of these factors are required for an efficienc...


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...vailable: http://www.bloomberg.com/news/2010-10-01/repsol-to-sell-a-7-1-billion-stake-in-brazil-unit-to-china-petrochemical.html. Last accessed 26th April 2014.
Moulds, J. (2012). China's economy to overtake US in next four years, says OECD. Available: http://www.theguardian.com/business/2012/nov/09/china-overtake-us-four-years-oecd. Last accessed 26th April 2014.
OECD. (2014). Foreign Direct Investment (FDI) Statistics. Available: http://www.oecd.org/investment/statistics.htm. Last accessed 26th April 2014.
White, J. (2014). China Lures More Investment. Available: http://online.wsj.com/news/articles/SB10001424052702304788404579521510670705136?mg=reno64-wsj&url=http%3A%2F%2Fonline.wsj.com%2Farticle%2FSB10001424052702304788404579521510670705136.html. Last accessed 26th April 2014.
World Economic Forum (2014) The Global Competitiveness Report, Switzerland: SRO-Kundig.

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