Trends In Volume Of Trade And Investmemt

Question 1

What is foreign direct investment (FDI)?

Answer 1

Foreign Direct Investment (FDI) is when a person, company or other group spends money in another country in order to generate profit, e.g. by opening a new branch of their business or investing in local infrastructure.

Question 2

What are the characteristics of countries that receive the most FDI? Give some examples.

Answer 2

Main attractions that pull in investment:
• Size of the market (how many people they can sell to) - China
• Stability of the market – no ta war zone
• Plentiful natural resources - Africa
• Ability to access financial services - Luxembourg

Question 3

What happened to the volume of FDI between 2006 and 2016?

Answer 3

The volume of FDI rose dramatically: about $400 billion in 1996 to nearly $1500 billion in 2016.

Question 4

What happened to the volume of FDI in 2022? Why?

Answer 4

After a strong rebound in 2021, global FDI fell by 12% in 2022 to $1.3 trillion due mainly to overlapping global crises - the war in Ukraine, high food and energy prices and soaring public debt.

Question 5

Is the distribution of FDI equal or unequal?

Answer 5

Unequal

Question 6

Describe the change in the pattern of FDI by HICs?

Answer 6

Until 1980s developed countries mainly invested in other developed countries. Since the 1980s developed countries have begun investing more in emerging economies and developing countries.

Question 7

. Where has the decline in FDI happened?

Answer 7

The decline in FDI was felt mostly in developed economies.

Question 8

. What has happened to FDI in developing countries?

Answer 8

Flows to developing countries have grown - albeit unevenly with a few large emerging countries attracting most of the investment whilst flows to the least developed countries declined.

Question 9

Where do NEEs invest?

Answer 9

Emerging economies now invest heavily in less developed countries e.g. China now invests a lot of money in countries in Africa and South America.