Transnational corporation and emerging market

Résumé du document

The Foreign Direct Investment (F.D.I.) refers to an investor's investments made interest in organizations that operate outside of the home country in order to get a sustainable interest (O.E.C.D., 1996). There are many studies that examine FDI issues and main researches on the motivations highlighting FDI were developed by Dunning or Vernon. “A Foreign direct investor is defined by an individual, an incorporated or unincorporated public or private enterprise, a government, a group of related individuals, or a group of related incorporated and/or unincorporated enterprises which has a direct investment enterprise, that is, a subsidiary, associate or branch, operating in a other country than the country of residence of the foreign direct investor” (O.E.C.D., 1996).

This assessment discusses the potential beneficial impact of FDI inflows to the host country economy. In a logical way, investors invest and receivers receive, to get sustainable interests. The assessment argues that FDI should have a positive effect on economic growth (Romer, 1986 & Lucas, 1988) as a result of technology spillovers, physical capital inflows, decrease of poverty and increase of GDP (Albuquerque, 2000), even if it seems that Görg and Greenaway (2001) are not agreeing with these hypothesis.

Extraits

[...] They do not want new competitors to enter the potential growing markets. Thus, the main objective of this strategy is to cut cost. Policies that open the market have a huge impact on the budget of a state as they reduce earnings from tariff barriers. If public expenses have to be cut, investments are likely to be sacrificed at the expense of the elaboration of a competitive offer and of the development of exportations. Therefore, withholding taxes will necessary have to grow in order to compensate. [...]

[...] Even within a single country, FDI is divided into the regions unevenly, that foreign investors often prefer to settle in the coastal areas to the detriment of the country. The state of infrastructure is an important factor in the attraction of FDI. The development of infrastructure (particularly transport) can improve competitiveness by reducing transport costs, property and productivity by reducing travel costs of labor (Mateev, 2009). The risks factors, concerning the political and financial stability, are a pre-requisite for attracting FDI. Political risks register at the forefront as a precondition for any foreign investor to relocate its activities. [...]

[...] They will produce, and therefore supply the world market for these products. After a while, when the product is sufficiently distributed, other countries may engage in production (need for more researchers, productions are standardized). Sekkat (2007) grouped the factors which determine the flow of the FDI inflows into three categories: The policies of host countries, active measures that countries adopt to promote and facilitate investment and the characteristics of the economy, the role of institutions (Frey and Schneider, 1985), the catalytic effect of foreign aid and stability of macro-economic data (fiscal, monetary and social). [...]

[...] Thanks to all of these upturns will come an increase of FDI inflows in nontraditional sectors, especially tourism and financial services (Dahlman, 2008). Thus, the introduction of foreign technology is a complementary development of an activity of the host country for many developing countries without technological advantage (Bertrand & Gouia, 1998). The macro level seems to be very important for the role of FDI in Africa's development, and so, for developing countries, following Dollar and Kraay (2000) centred on the effects of FDI on growth and poverty reduction. [...]

[...] South Africa has moved from traditional industries to the production and financial services, which are the main contributors to GDP. Tourism and retail sector show enormous potential (Doing Business, 2011). Nigeria, Congo or Ghana, are opening more and more the entry barriers, by decreasing the cost, privatizing (Nigeria privatized more than 116 enterprises between 1999 and 2006, for example). Although the policies of many governments have a long way to go, these important first steps enabled a private business sector to emerge (McKinsey, 2011). [...]