a2 econ feras and muhannad fdi

What Economic effects may result from an increase in Foreign Direct Investment into an Economy :

What Economic effects may result from an increase in Foreign Direct Investment into an Economy

What is Foreign Direct Investment? :

What is Foreign Direct Investment? FDI is defined as the ownership of productive assets such as factories, firms or other businesses by foreign multinational companies.

The UK and inward investment:

The UK and inward investment The UK has traditionally been the leading recipient of the FDI in Europe, and coming second only to the US on a global scale Much of the UK’s success in attracting FDI has been due to Flexible labour wages low level on corporation tax and regulations However this is no longer the case as Ireland has corporate tax 16% less than the UK FDI may be seen to only have benefits, and whilst its true that the advantages may outweigh the disadvantages there are some countries who put restrictions on the level of FDI, such as India, to protect their domestic businesses from competition by multinational firms.

What does this represent?:

What does this represent? N W O R G

Employment and Economic Growth:

Employment and Economic Growth Increased FDI is most likely to lead to an increase in levels of domestic employment Which will lead to an increase in the levels of income and thus less people will be reliant on state welfare schemes As income increase this means that the level of consumption in the economy will increase, and with the aid of the multiplier effect further increases in income will be possible As the cycle continues, this increase in income will create more demand which thus creates the incentive for firms to increase their investment and increase supply. All this will lead to an increase in aggregate demand (AD) and thus an increase in economic growth As well as that, standard of living for the poor should improve as the government has more money to spend on them rather on state benefits

Slide 6:

JUMPING JACKS

Increased Competition:

Increased Competition New investments can act as a spur to domestic business to improve their productive efficiency. New firms may adopt new management techniques which can be adopted by the rest of the economy, as was the case when the Japanese car manufactures used both just in time(JIT) and total quality of management (TQM) in the UK. As well as that, new firms may spend a lot of money to train workers, which will therefore improve the quality of skill in the economy as a whole. As competition increases prices should start to fall which will therefore benefit consumers as they have to pay lower prices for goods and services. However this all comes down to the assumption that these new firms don’t adapt capital intensive process that will be to difficult for domestic firms to comply with. If this does occur it could lead to a rise in unemployment as more workers are being laid off due to firms either shutting down or reducing their costs

Tell a Joke:

Tell a Joke

What is the cost of FDI?:

What is the cost of FDI? FDI may come at a cost, so what must the government do to attract FDI. It must be able to provide significant tax incentives , however by doing so they risk losing potential benefits in terms of tax revenue In some cases, the reason why foreign investors locate in developing countries is so that it can benefit from the low cost labour companies such as GAP, Nike and Adidas have been accused of exploitation of labour force in Asian countries by making them work for longer hours in unsafe conditions and paying them as low as 10p per hour However, companies are finding it much harder to do this as people are putting much more pressure on multinationals to abide by their expectations and if not they risk consumer boycott

Which is the odd one out?:

Which is the odd one out? 2 - 3 - 6 - 7 - 8 - 14 - 15 - 30

The downside of FDI:

The downside of FDI Whilst FDI is expected to result in an increase in exports, it may also result in an increase in imports This could be because as incomes have risen people are starting to demand non-domestic products or due to firms importing capital equipment This can have a detrimental effect on the exchange rate, as an increase in the account deficit will lead to the depreciation of the currency. This is especially worrying in developing countries where demand for imports such as oil and foodstuffs is relatively price inelastic and will thus lead to cost-push inflation Also FDI is always criticised for being footloose. Which means the only reason they will operate in a certain country is for its benefits and incentives. Once these are gone, the FDI will locate to somewhere else where these benefits exist. Therefore, as soon as they leave they will most likely fire everyone at the factory and thus increase the unemployment in the area once again

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http://www.youtube.com/watch?v=dq3zuNk0C7c http://www.youtube.com/watch?v=1GaKaGwch0U

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