What is foreign direct investment of importance?

Before proceeding on the discussion regarding the importance of foreign direct

investment, it is a must to tackle what FDI (foreign direct investment) is and how it
actually works. FDI is a type of investment made by foreign business to an entity based
on another country, thus it is a form of investment which controls the ownership of a
business in one country from another. However, despite acquiring foreign business
assets in a foreign company, FDI are distinguished from portfolio investments, wherein
investors merely purchases foreign-based companies' equities.
FDI usually happens between a developed and developing country, for the
reason that FDI utilizes in open markets rather than closed ones. Before investing in a
foreign country there are various things that the business considers including the skilled
workforce that the country can offer and the above the average growth aspects of the
business in the chosen country. And as we go deeper in the topic, we can also see that
FDI involves more than just capital investments, in fact it also necessitate provisions of
management and technologies. As a wrap up, the key feature of FDI mainly revolves
around the effective control of the decision making of foreign business.
And now diving into the main topic, which is the importance of FDI, let me give
you an example that would perfectly show how huge the effect of FDI is not only to the
business but also the economical growth of a country. It was in year 2017, when Apple,
a U.S-based company announced that they would make a $507.1 million investment in
China. After their two largest market, namely Europe and America, they are now
venturing in China to boost their research and development work, making it their third
largest market. A quarter preceding the announcement, there was a 12% year-over-
year decline in Apple's Greater China revenue.
An influx of FDI targeting the China's high tech manufacturing and services had
fueled China's economy, which according to China's Ministry of Commerce, grew 11.1%
and 20.4% year over year, in the first half of 2017. During this time, it has been allowed
in India by the FDI regulations to incest in single-brand retail without the government
approval. This regulatory decision has been reportedly what fuels Apple's desire to open
another physical store in India.
According to tech industry analysts, Apple expects these rewards in exchange of
their investment in China, and here are some of them:
1. An increase on Iphone sales - getting closer to their customers and competitors will
also lead them to choose Apple over local brands.
2. Good public relations - before venturing their business to China, Apple was accused
of just wanting to earn money from Chinese then leave, in short it was purely business.
After their investment, it was also considered as move to show commitments towards
Chinese customers.
3. Reliable relationships with supplies - In the past, Apple has worked with BYD, an
assembler and component maker which is based on Shenzhen, China and BYD ended
up filing a patent lawsuit. Analysts then warned them that Chinese companies will steal
technology, either for relaunching or making a knockoff brand. This explains why Apple
needs stronger relationship with suppliers.
The investment of Apple in China had shown the importance of FDI for a
company's growth, and now let's discuss about its effect on a country's economical
growth. As stated above, FDI plays a huge role in developing economies and emerging
markets. It stimulates economic growth by acting as a primary source of external capital
and increased revenue for a country.
This often leads to opening of factories in the invested country, which would be
using local equipment -- either materials or labor force. In conclusion, the large-scale
employment would result to an increase in employment rate of the country and more
people improving the standards of their living.
Enhancing the standards of living would also involve the country's finance and
technology sectors. One word to describe the process of FDI would be "robust". For the
reason that it provides several tools to the country which can be leverage to advantage.
For example, after a foreign direct investment occurs, the recipient business from
another country would be provided with access to the latest tools in finance, technology
and operational practices. And as time passes by, would be assimilated in the local
economy which would make the tech-industry efficient and effective. Concluding these
topic, the main reason why FDI is important would be the help it offers to developing
countries' backward areas and helping it to transform into an industrial center. Since FDI
is between two countries, the goods produced may be marketed domestically and also
exported abroad, making another essential revenue stream possible. Which would soon
result to exchange rate stability, capital inflow and a competitive market.

Do you think the pandemic of 2020 hour change the global market landscape?
Explain.

The global market landscape has surely changed the process of business.
Currently, another factor has affected not only our lifestyle bu also this global market
landscape. The pandemic of 2020, or most commonly known as COVID-19, has gone
through great lengths from its effect on the simplest things to huge complex decision-
makings.
During the pandemic, it is undeniable that lots of things have changed and we
were offered a new normal way of living. In depths of this changes on our ways of living
are also changes on how businesses process and works. One after another store
closes down in the past few months, there were huge companies that announced
bankruptcy. Lord & Taylor which roots back from 1826, has declared bankruptcy after
the pandemic, Brooks Brothers which operates since 1818 has also declared
bankruptcy and NPC International Inc. which is the largest franchise of Pizza Hut has
also declared bankruptcy.
 The pandemic had tons of negative effects on the business industry. But it also
gave chance for small businesses to bloom and start anew. The said crisis had not only
changed local businesses but also the global market. From the new normal meetings
which can only be done via online platforms to flights that can't be taken because of
travel bans, these health protocols have piled up to be businessman hurdle in the
growth of their business and investments.
It was predicted by economists and business analysts that major economies
could have a loss of up to 2.4% on their GDP. With the global stock markets that are
dramatically falling due to outbreak, it is a threat that this prediction might become a
reality anytime soon. An economical pain is still felt in different countries, whether
developed or not, because of the virus containment measures that continually
decreases economic activities.
Trade shows and business conferences was canceled in different parts of the
world, like the huge event in Chicago, Inspired Home Show, that has almost 60,000
possible attendees. Tourism had also fluctuated down, reflecting to a global business
travel revenue loss of $810.7 Billion.
According to economic experts, we are still unsure of until when the pandemic
will last. Leaving the global market landscapes to just adopt a strategy that benefits from
volatility. Volatility that enhance returns whether the market shift violently up or down.
This has been the changes that happened and are expected to happen during the crisis
of COVID-19.
Due to the pandemic it might also affect the balance of trade for a long time.
Balance of trade are the difference between import and export. Imports are goods and
services made in a foreign country but bought by a country's residents, while exports
are made domestically and sold to foreigners. Calculated by subtracting the total value
of all exports to the total of value of all imports between two countries or one country
and the rest of the world. When import exceeds export, it is considered to be a trade
deficit which can affect foreign exchange shortages and hurt countries. Although this
might be the case for other countries, trade deficit is not always considered unfavorable,
countries that must import heavily as an investment in economical development
considers trade deficit as beneficial but for short-term only. Trade surplus, which is the
opposite of trade deficit, happens when export exceeds import, is considered to be a
favorable trade balance. However, it might become harmful when the government use
protectionism.

What is the balance of trade? Explain its importance to globalization.

Balance of trade is essential in determining a country's economical stand. This is

because balance of trade is the biggest component of balance of payments, which
measures all international transactions of a country. Trade balance also plays the
biggest part of current account, which measures the country's net income earned on
international assets.
It also has an impact to currency exchange rates that might lead to an increase
or decrease of currencies. For example, if a country with high demand for its good
would export more than it imports, it would increase the demand for its currency. While
the country that imports more than it exports would likely have less demand for its
currency. Our example states that the currency is on a floating regime, meaning that the
market determines the value of the currency relative to others. In cases where one or
both currencies are fixed or pegged to another currency, the exchange rate does not
move so readily in response to a trade imbalance.
Aside from its effect on currency exchange rates, it also plays a huge part in
globalization. Globalization happens when there is an interdependence between
countries arising from the integration of different aspects of economy. This definition
doesn't fall far from the definition of trade. The reason why trade happens is various
businesses search for new growth opportunities beyond home country borders, leading
to the importance of international trade in GDP of other countries.
Importing products from other countries or exporting other countries' goods are
good for globalization because not all countries have the resources and skills required
to produce certain goods and services. For example, some countries might have an
abundant resources of oil, while some might lack it, this is when the balance of trade
would come into the discussion. By importing what you lack and exporting what you are
sufficient with, globalization happens.
To sum up everything, balance of trade is crucial in the global, cultural, political
and economic integration of a country.
Sources:
Amadeo, K. (n.d.). The Danger When Imports Exceed Imports. Retrieved from
https://www.thebalance.com/balance-of-trade-definition-favorable-vs-unfavorable-
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Beltekian, E. O. (n.d.). Trade and Globalization. Retrieved from
https://ourworldindata.org/trade-and-globalization
Chen, J. (2020, August 28). Foreign Direct Investment (FDI). Retrieved from
https://www.investopedia.com/terms/f/fdi.asp
Clifford, L., Wahba, P., & Editors, F. (2020, September 22). A running list of companies
that have filed for bankruptcy during the coronavirus pandemic. Retrieved from
https://fortune-com.cdn.ampproject.org/v/s/fortune.com/2020/08/04/companies-filing-
bankruptcy-2020-due-to-covid-list-filed-chapter-11-coronavirus-pandemic
FDI Advantages and Disadvantages. (2020, August 31). Retrieved from
https://www.angelbroking.com/knowledge-center/share-market/advantages-of-fdi
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https://www.imf.org/external/pubs/ft/fandd/2001/06/loungani.htm
Menickella, B. (2020, April 13). COVID-19 Worldwide: The Pandemic's Impact On The
Economy And Markets. Retrieved from https://www-forbes-
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