Question

Do you agree or disagree with the following statement: "Countries with a higher share of foreign direct investment relative to foreign portfolio investment suffered more from the capital flight (note: capital flight from emerging markets due to Covid-19)." Explain you answer in details.

Answer 1

I agree with the statement. Foreign direct investment (FDI) is purchasing or building businesses and it's associated infrastructure in a foreign nation. On the other hand the foreign portfolio investment (FPI) is the purchase of the securities of foreign nations such as bonds and stocks on an exchange. In my opinion the FDI flows to developing nations are expected to fall by more because the developing countries have been severely impacted by the pandemic and less health care resources to fight with the Covid-19. In the longer run, the Covid-19 may cause the organisations on shifting the geographic allocation of their foreign operation. These shifts can lead to significant implications for the nation’ economic prospects as MNEs are responsible for a huge share in global value-added, employment, trade, and R&D. Moreover it causes the demand contractions, supply disruptions, and pessimistic outlook of economic actors. Furthermore countries have put the restrictions on incoming investment; and government tightened the foreign direct investment review for corporation’s especially in public health and in the supply chains of essential products and services.