EC501 International Economic Development Report 2
Students should chose an issue from topics 3, 4, 5 or 6 that interests them. There is considerable scope provided in these topics and a number relate directly to agribusiness. Students should choose their issue as early as possible and read widely. Special attention should be paid to all the material used or referred to in the relevant class session (PowerPoint presentation). Issues that could potentially be addressed include:
• Trade in primary commodities as a barrier to economic growth in developing economies
• Economic enclaves as an impediment to economic growth in developing economies
• Application of dependency theory to economic development in the Global South
• Costs and benefits of international migration flows among nations
• The role of international aid in relieving foreign currency shortages
• Costs and benefits of industrialisation as a growth strategy
The written report should outline the chosen issue and state why it is of interest in the context of international economic development. Contributions to analysis of the issue from both theoretical and empirical perspectives should be presented, noting areas of agreement and disagreement and identifying any gaps in the literature that could be addressed by future research. Lessons or implications for government and business should be discussed. Students will then each present their report.
In the business setting Foreign direct investment is the form when one country planned to develop within another country (CFI, 2024). It is associated with lasting interest rate establishment for the business. Before being involved with the chosen issue of discussion FDI benefits are essential to view as labor cost lowering, market diversification, tax incentives are there. The report considers issues about the foreign direct investment as impact of Global crisis. Furthermore, a statistical report claimed that during the 2008-2009 financial crisis drop down investment dropped by around 30% which again repeated in 2020. Regarding this published report of Investment Trend Monitor showed that a higher fall is noticed around 42% than previous reported loss (UNCTAD, 2021).
Figure 1: FDI Inflows
(Source: UNCTAD, 2021)
In this report, based on these chosen issues, an economical perspective is reviewed to understand the influences and associated consequences. As per the available information Global Crisis hit North America investment around 46% whereas for the United state it showed 49% drop (UNCTAD, 2021). This statistical value for MBA Assignment Expert showed the priority of further review on the issues to determine the impact for the country's economics. In purpose of make this report authentic, focus on the global economy is chosen to make the review relevant.
2.1 Theoretical and Empirical Review
The correlation of the Global crisis and FDI developed fractured and shifting investment patterns is observed. Additionally, the complex nature of FDI was shown in a UN Trade and development published report. The impact of FDI growth stagnancy is noticed for the impact of geopolitical tension as well as increasing investor caution (UNCTAD, 2021). In the below figure, the struggle for FDI within the trade and production aspect is shown. Observing the situation and understanding the lag of international production geopolitical tension leads to growth of global investment. As the economic development depends on FDI this volatility causes the gap for countries.
Figure 2: FDI Stagnancy
(Source: UNCTAD, 2024)
On the other hand, theoretical review showed that FDI works as a stimulator that supports a globalized economy. As per Joshua et al., (2020) home economics growth is supported by FDI inflows and external loans that enable scope for meeting domestic investment demand. This modernization theory is explored in this paper which indicates economic growth dependency. However, Max Weber modernization theory showed that the experience of development is generated by modern practices. On the other hand, FDI-induced growth is also observed for different countries like South Africa, China, India. This indicated positive influences and correlation of FDI inflow importance to obligate the stability for economic development. According to Ciobanu et al. (2020) in absence of FDI inflow economic loss of the country is certain which impacts on internal capability of financial flow. As FDI stagnancy is directly involved with limited international trade interest which impacts the ability of fair paying and investment. Considering FDi more than a form of investment it is interpreted as long term business stability. It can be affected by any external sources like pandemic which created the tendency of FDI blockage that turned out as economic shock to the country. However, FDI impact as a catalyst causes the concern of stagnancy during the Global crisis.
2.2 Arguments for Review
In an argumentative perspective, the UNCTAD report claimed that the geopolitical tension and shifting trade impact causes impact on FDI. Joshua et al., (2020) argued that country economical standards impact on the FDI flows. As the FDI induced economic growth is varied with country position but the UNCTAD paper according marketing shift can be occurred in any country's market. Comparing these two factors, geopolitical tension and its varying impact for market demand shift negatively impact the FDI inflow. This leads to the stagnancy that is noticed as a validated aspect while exploring global crisis impact on FDI fall off. As the report is developed to understand the scenario of Global crisis on FDI fall so reviewing over the incidents is useful. The impact of external impact like pandemic hit back the growth as the interest of investment is fractured. It needs to be understood that the relation is established in paper which makes sense about validity in the goal of review. The point of external impact shown in paper Ciobanu et al. (2020) is validated as it establishes the connection of FDI in economic growth. However, the contradiction about the pandemic impact remains the same or different for the country 's position aspect needs to be investigated.
2.3 Identify Area of Focusing
In the paper of Joshua et al., (2020) country economic position and FDI inflow stagnancy is discussed but the gap is noticed for the crisis causing drop of FDI. It has been found that working with a gap of determining the crisis impact on FDI inflow inclusion in the current report limited the outcome. In the developed report a clarity about crisis through causes changes in FDI inflow is considered. This causes the chances of eliminating the gap of literature which may impact on the decision for final thought of global crisis impact on FDI fall off.
2.4 Implications for Government and Business
â—Ź Policy reformation is required to make the further growth of FDI oriented decision making for the country. Under this policy, the value of protecting foreign tariffs is essential to make the inflow of investment stable. In lack of stable connection during crisis a higher tendency of fall of investment may result. As Fong and Mohs (2020), if tariffs become too high the higher tendency of business impairment may result in poor foreign investment attraction. This suggested policy for FDI makes the interest for international investment and benefits for economic growth stable. The benefits for taxation become access for the FDI plan developed by the business.
â—Ź Government focus needs to be shifted towards the practices of MNEs for benefits of FDI relationships. As the access for cheap labor becomes developed for the MNEs they need to value the safety and work practiced due to negligence. The shoe factory collapse in Bangladesh caused the death of 1000 workers (International Labour Organization, 2023). This needs to change to make the FDI inflow sustainable for the business otherwise it may directly hit back the growth. The initiative of the Government creates ethical responsibility for MNEs whereas the relationship chances became wider with foreign investors.
The detail of reviewing showed that there is a relation of potential factors causing global crisis through FDI drop. Additionally, the use of different resources showed the value this issue holds for economic aspects. As this report focuses on FDI impact, change and importance so that used paper review makes sense for that. The impact of the country's economic position and FDI drop off is set with detailed investigation. On the other hand, geopolitical tension, and relations of FDI is measured. It has been found that factors may be shifted with condition or market scenario yet the consequences always constantly hit the growth. An example of geopolitical tension showed the clear drop of foreign investment that makes the blockage for FDI inflow. As a result of this stagnancy of FDI directly impacts the benefits it offers for the country. The determination of periodical FDI falls as a challenge for the sources used for review in the report. On the other hand, policy, and responsibility of Government both are identified as solutions of implication that can hold strength for the future investment decision.
CFI. (2024). Foreign Direct Investment (FDI). Retrieved from: https://corporatefinanceinstitute.com/resources/economics/foreign-direct-investment-fdi/#:~:text=Foreign%20direct%20investment%20(FDI)%20is,securities%20from%20a%20foreign%20country. (Accessed on: 28th August, 2024)
Ciobanu, R., Ĺžova, R. A., & Popa, A. F. (2020). The impact of fdi over economic growth and how covid-19 crisis can impact the CEE economies. CECCAR Business Review, 1(4), 64-72. https://www.ceeol.com/search/article-detail?id=859406
Fong, V., & Mohs, J. (2020). Exploring the Impact of Tariffs on Foreign Direct Investment and Economic Prosperity. https://digitalcommons.newhaven.edu/accounting-facpubs/8/
International Labour Organization. (2023). The Rana Plaza Disaster. Retrieved from: https://webapps.ilo.org/infostories/en-GB/Stories/Country-Focus/rana-plaza#intro (Accessed on: 28th August, 2024)
Joshua, U., Rotimi, M. E., & Sarkodie, S. A. (2020). Global FDI inflow and its implication across economic income groups. Journal of Risk and Financial Management, 13(11), 291. https://www.mdpi.com/1911-8074/13/11/291
UNCTAD. (2021). Global crises fracturing foreign investment, impacting developing economies. Retrieved from: https://unctad.org/news/global-crises-fracturing-foreign-investment-impacting-developing-economies#:~:text=Since%202010%2C%20global%20GDP%20and,tensions%20and%20increased%20
investor%20caution. (Accessed on: 28th August, 2024)
UNCTAD. (2021). Global foreign direct investment fell by 42% in 2020, outlook remains weak. Retrieved from: https://unctad.org/news/global-foreign-direct-investment-fell-42-2020-outlook-remains-weak (Accessed on: 28th August, 2024)
UNCTAD. (2024). Shifting investment patterns: 5 key FDI trends and their impact on development. Retrieved from: https://unctad.org/news/shifting-investment-patterns-5-key-fdi-trends-and-their-impact-development (Accessed on: 28th August, 2024)