Question

Question 3: For the last two decades, foreign direct investment (FDI) has been offering an unprecedented opportunity for developing countries to achieve faster economic growth. Through FDI, foreign investors be and managerial know-how. For capital-scarce developing economies, FDI implies access to not only capital but also the benefit of acquiring advanced technology, managerial expertise, employment productivity, human resource development, global marketing networks, and best-practice systems of corporate governance. In particular, Asian countries have been successful in attracting FDI Consequently, FDI in Asian developing countries increased from $396 million in 1980 to $275 billion in 2010, 1 indicating Asia as a main destination of FDI. While dramatic shifts in the composition of recipient countries have changed over time, with China currently becoming an attractive destination for FDI, Southeast Asia continues to remain an attractive hub for foreign investors. Although Southeast Asian countries have been successfully attracting FDI inflows, success in attracting FDI has varied widely between countries. Some countries fare much better than others in attracting and hosting foreign investment projects within Southeast Asia. Within this context, this study aims to understand the reasons behind why certain countries have high FDI inflows while other countries have low FDI inflows, with special reference to countries in Southeast Asia. In particeular, the Philipines and nefit from utilizing their firm-specific assets and resources efficiently, such as technology Thailand will be examined. The two countries share many of the economic determinants of FDI in common, however, the level of FDI inflows differ substantially Answer the following questions each one carries 10 marks Do you think the political institutions can be considered as significant incentives or deterrents to FDI inflows in the Philippines and Thailand? What are the factors contributing for the inflow of FDI in Southeast Asian countries? a. b. role in inviting more FDI? d. Trade liberalization is an essential engine for growth for developing countries, Explain this statement with reference to Southeast Asian countries. e. Higher GDP level of economic development attracts higher levels of FDI inflows. Critically evaluate this statement. Question 2: What do you mean by the concept of Circular Economy and Mechanisms of Protection to the Environment, and Renewable Energy Generation? Explain I detail with relevant examples. 20 Marks

Answer 1

• The Policy regime can both act as a significant incentive and deterrents for FDI in a country

Which can be clearly seen from the example of Philippines and Thailand. The FDI policy of Philippines are more favorable and pragmatic. The ruling government plays a significant role in implementation of FDI as Thailand lags behind in comparison to Philippines.

• One of the major reason that southeast nations are attracting FDI because developing economies strive to attract more FDI to enhance their economic performance.
  • Most of the southeast nations adopt FDI to improve infrastructure like ports, roads telecommunication to facilitate doing business in the domestic economy
  • FDI has also contributed to higher employment rate and female participation in the formal economy
  • The participation of local governance exerts a highly significant and positive effect on both greenfield FDI (where foreign firms build production facilities)
  • Overall a good investment climate attracts both the productive domestic and foreign private investment that helps fuel growth and reduces poverty.

• Trade liberalization which is an integration to world economy is a proven powerful means for countries to promote economic growth, development and poverty reduction. It has raised living standards around the world. Most developing countries are benefited by the trade linearization which increased their exports of manufactures and service related to traditional commodity exports. There is considerable evidence that more outward-oriented countries tend consistently to grow faster than ones that are inward-looking.
• There is a strong relationship between higher level of GDP and high FDI inflow. Some of the factors supporting the fact are-
  • Improvement of investment climate and awareness from the government
  • Business regulation reform to attract more investments.
  • Ease of doing business to improve economy

2. A circular economy aims to redefine growth, focusing on positive society-wide benefits. It includes gradual decoupling economic activity from the consumption of finite resources and designing waste out of the system. As a part of mechanism of circular economy its ambition is to significantly expand contribution towards the realization of a circular economy, both in terms of gross national product and the creation of a healthy, safe, and sustainable living environment. Creating more awareness towards protection of environment and heading towards cleaner form of energy source