Paterns of market competition Essay Example | Topics and Well Written Essays - 3000 words

Paterns of market competition - Essay Example The Post World War II the position was that the US was dominating the world share of FDI by three quarters of the entire market share. The US at this point had around three-quarters of the Global FDI (1945 and 1960).However today in the age of globalisation the FDI is no longer a phenomena restricted to OECD countries. FDI growth is very important for the modern global economy with the FDI stocks now constituting over 20 percent of global GDP. Inward FDI happens when there is an investment of foreign capital within a country's own local resources and can be attracted by tax holidays and tax subsidies, low rates of interest, and more investor friendly laws. However ownership restraints or differential performance requirements are likely to discourage FDI. Outward FDI is local investment in foreign resources and is encouraged by a positive role of the host governments in providing insurance and tax breaks for these people who want to trade abroad. Therefore "Foreign Direct Investment" can be both inwards and outwards for the economy. Academics have expressed a lot ... ion of corporate control over international boundaries: Therefore the recent ability of the FDI to benefit or profit an economy has also suffered from criticism is to its negative effects. In the case of Developing Countries a comprehensive study by Bosworth and Collins (1999) investigated evidence concerning the effect of capital inflows and found that multinationals find it cheaper to expand directly in a foreign country rather than through trade " in cases where the advantages associated with cost or product are based on internal, indivisible assets based on knowledge and technology." The assertion whether large inflows of foreign capital present developing countries with a good opportunity in accelerating their economic development or not is a big question mark for economists in the light of the recent developments that have taken place in the Asian markets. With the governments of developing countries actively seeking our FDI's for their countries there is a large disagreement amongst economists and development agencies whether FDI flows are to some extent determined by the effectiveness of host state legal systems .The main players in the risks associated with FDI's are the host states, foreign investors and those engaged in development assistance and theorising(like the World bank.) There has to be an effective use of legal and economic reforms which balance domestic commercial and non-commercial interests. The following diagram shows the rise and fall of FDI in developing country, Vietnam .Notice how the trends are very irregular thus putting the whole benefit of the FDI in doubt.1 The many theories of FDI Foreign investors will need to be shown whether the local taxation and legal system will not unduly restrict their profits and activities .In