FDI can be considered a way to strengthen the « domination of capitalist economies » and the dependence of peripheral countries for PREBISCH. The neomarxist theory is outdated but FDI can still have no effect, or even detrimental ones - The dependence on foreign companies (ex. UNGARY) => the government has to help local companies to take advantage of the presence of international ones. Some countries receive FDI but nevertheless there is still no growth and they still suffer from poverty (ex. ANGOLA, « cellar countries »)
[...] logo-fr.png < number > IndiaF Facts High individual taxes (up to High industrial tariff rate on average) No incentives for imports of specific goods, such as high tech goods. Even the transfer of high tech skills and industrial upgrades were not encouraged. logo-fr.png < number > IndiaF FDI in India Nowadays: slowdown in investments (especially in the agricultural and manufacturing industries) TNC affiliates in India account for only of total exports (compared to 50% in China and 15% in Taiwan and Korea) logo-fr.png < number > IndiaF Problems Major problem: the Indian state. [...]
[...] Ireland only seen as a production platform and not as a market by US firms interested in penetrating the European market. Nature of FDI FDI logo-fr.png < number > IrelandF Ireland wins Microsoft and Intel investment project (1985 and 1989): - The country moves from low cost/low wage production platform to knowledge economy. - Lever for further MNEs on basis of key firms already in Ireland. [...]
[...] Nature and role of Foreign Direct Investment (FDI) in Ireland, China and India (2005) logo-fr.png < number > Agenda Theoretical background of FDI Focusing on the countries studied: India China Ireland Conclusion logo-fr.png < number > FDI: Theoretical background logo-fr.png < number > FDI and development FDI increases the host country's growth rate through an efficient allocation of money because they are implemented: In countries where the education system and the facilities are well designed for LUCAS DUNNING's OLI paradigm (ownership, location, internalization): the advantages of the firm become the country's ones They offer extra resources for the host country FDI/GDP ratio in developing countries : in 1988 in 2000 logo-fr.png < number > FDI and development FDI can be considered as a way to strengthen the ‘domination of capitalist economies' and the dependence of peripheral countries for PREBISCH The neomarxist theory is outdated but FDI can still have no effect, or even detrimental ones The dependence on foreign companies UNGARY) the government has to help local companies to take advantage of the presence of international ones Some countries receive FDI but nevertheless there is still no growth and they still suffer from poverty ANGOLA, ‘cellar countries') logo-fr.png < number > FDI and development Different conditions of efficiency for different levers: BORENSZTEIN, DE GREGORIO, LEE: the more educated the population, the more efficient the FDI If the country is protectionist, it will be more entitled to cash in on FDI Example given by BOUTEILLER and FOUQUIN (2001) Recent development of newly industrialized countries (Asian ‘tigers' and ‘dragons') that implemented an updated version of AKAMATSU's development scheme CHINA) Japanese model logo-fr.png < number > FDI and development BLOMSTORM, GLOBERMAN, KOKKO: transfers to the host country, efficient MNCs can act as an incentive for national companies (even more so concerning clusters) Firms are more disposed to transfer technology when they own 100% of the local subsidiary Vertical links between companies whip up such transfers KRUGMAN, NEG: location of FDI FDI tend to be implemented in the same location (that gathers assets for MNCs) before generating positive spillovers for the whole region For the government, this means: Setting up incentives to attract FDI fiscal policies) Prompting companies to settle in the best location for the country Avoiding imbalances in the country's spatial organization and gaps between national and international companies logo-fr.png < number > FDI and development MAINGUY (2004), Different policies for different types of FDI and countries: Some countries will be chosen for their characteristics (growth, facilities, political stability, etc.); their educated workforce will allow them to benefit from FDI Some countries attract FDI only because of their tax policy, their exports do not benefit local companies but only foreign international ones; they have to ease transfers between both kinds of companies logo-fr.png < number > FDI and development Some countries are chosen because they can provide a low cost workforce; they have to set up policies in order to allow them to upgrade gradually their specialization Countries that attract mines- or petrol-linked capital are in a stalemate because the FDI will not prompt them to enhance their situation The poorest countries have been left alone so far and will remain dependent on international solidarity for the foreseeable future logo-fr.png < number > FDI and development To sum up : FDI is a growth lever for host countries But they can have detrimental effects on the country's structure and economy Looking at the channels that link FDI and growth (education, transfers, location), we can advise the country as to which policies to implement in order to attract FDI Turning growth into development will highly depend on the nature of both the country and FDI itself logo-fr.png < number > IndiaF India & FDI india_silicontrafficjamlogo-fr.png < number > IndiaF FDI in INDIA After independence: aversion to FDI linked to the colonial past (UK colony) The Indian economy had been ruled by a foreign company for decades: the East Indian Company. Since the end of the 40's: barriers to a competitive business environment. [...]
[...] The next step will be to put in practice the benefits received from investing countries. Inward FDI has decreased over the last few years in Ireland, whereas the country has seen a surge in outward investment that indicates the possible move towards a more conventional FDI pattern for a developed country. logo-fr.png < number > Indicative bibliography : Graham, E.M. [...]
[...] There was a once-off capital intake as FDI was mainly Greenfield FDI is not acting as a substitute for imports - foreign firms import of their input versus for indigenous firms. (Census 2003) Balance of payments Source : Monthly Financial Bulletin, November 07, irlgov.ie logo-fr.png < number > Conclusion India was first thought to have the same potential as China; however, the country hasn't managed to attract foreign companies because of the lack of proper legislation and their focus on the services sector. [...]
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