Liberalising FDI

Question 1

What explains the upsurge in FDI over the

last 20-30 years? (1)

Answer 1

The Past

• Nationalisation in 60s + 70s
• Performance requirements

Question 2

What explains the upsurge in FDI over the

last 20-30 years? (2)

Answer 2

Recently;

Liberalisation of FDI regimes:

Question 3

FDI Regimes

Answer 3

• Unilateral liberalisation
• Uruguay Round of GATT: TRIMs
• Bilateral investment agreements
• Regional agreements with investment chapters (Nafta, EU-Mexico)

Question 4

Incentives for MNCs to come in:

Answer 4

• Tax deductions
• Set-up costs
• Infrastructure
• Subsidies

Question 5

Explanations for Liberalising:

Answer 5

-Loss of control

Question 6

Positive side:

Answer 6

• Capital inflow
• Inflow of tech and expertise
• managerial expertise
• access to marketing networks

Question 7

Downsides: (potential)

Answer 7

• don’t always bring capital etc into country
• may take up capital in local markets
• drive local companies out of business
• managerial positions filled from outside

Question 8

Should MNC activity be regulated at the international level?
(YES)

Answer 8

• export of jobs
• regulatory competition
• labour rights

Question 9

Should MNC activity be regulated at the international level?
(NO)

Answer 9

• economic efficiency
• pay higher wages
• spillover effects