Question

Subject: International business.

b. What are generally the two extremes of market policies towards FDI. Evaluate and explain the balance policy between the two extremes?​​​​​​2.5

c. You are the CEO of a Pakistani company that has to choose between making 100 Million Dollars investment in UAE or Qatar. Both investments promise the same long-run return, so your choice is driven by risk consideration. Assess the various risks of doing business in each of these nations. Which investment would you favor and why? Explain giving economic, social, political, and ethical reasons.​5

Answer 1

( b ) FDI stands for Foreign Direct Investement. Each country has its own policy towards foreign direct investment as per its financial needs, political structure of the government, and its ideology, whether it is pro FDI or against FDI.

The two extremes of market policies towards FDI are following:-

( I ) A pro-capitalist free market approch is an FDI policy where government doesn't intervene in the market allowing free FDI mobility in and out of the country. In such economies there could be a lot of volatility in the exchange rate due to free capital mobility. Such a policy is generally adopted by small open economies such as New Zealand, Switzerland etc.

( II ) The other extreme policy is an FDI policy where the government of the country is staunchly against any FDI inflow. Such policies are mainly due to strong ideological reasons. For example, North Korea doesn't allow FDI to remain self-reliant and isolated from world economies

( c ) Although the answer is a subjective one I would choose to invest in UAE despite getting same return in the long-run.

I find UAE to have less risk in terms of economic resilience due to a large and most diversified economy in the GCC.

Economic reasons- UAE's economy is much larger than Qatar, with a large expat population, and it being the most famous tourist hub in the middle - east, the country offers better prospects in terms of economic growth and develoment.

Social- The country is famous for providing social harmony to its population. People from all across the world have come to the UAE and achieved sucess, which means there is equality in opportunities.

Political- UAE has seen the most stable government with least involvement in conflicts around the world and in the region whereas Qatar has been mired in political conflicts with its neighbour- Saudi Arabia.

Ethical reasons- I think UAE is more equal in terms of providing opportunity to the people and therefore it is more ethical to invest in this country.