Foreign Investment During the Recent Global Economic Recession
Foreign Investment during the recent global economic recession
ABSTRACT:-
The year 2008 marked the end of a growth cycle in international investment that started in 2004 and saw world foreign direct investment (FDI) inflows reach a historic record of $1.9 trillion in 2007. Since then FDIs have been decreasing. The fall in global FDI in 2008–2009 is the result of two major factors affecting domestic as well as international investment. First, the capability of firms to invest has been reduced by a fall in access to financial resources, both internally – due to a decline in corporate profits – and externally – due to the lower availability and higher cost of finance. Second, the propensity to invest has been affected negatively by economic prospects, especially in developed countries that are hit by the most. The setback in FDI has particularly affected cross-border mergers and acquisitions (M&As), the value of which was in sharp decline in 2008 and early 2009 as compared to the previous year’s historic high. It has also taken the form of a rising wave of divestments and restructurings.
Nevertheless, some favorable factors for FDI growth are still at work, some of which are even a consequence of the crisis itself. Public policies will obviously play a major role in the restoration of favourable conditions for a quick recovery in FDI flows. Structural reforms aimed at ensuring more stability in the global financial system, renewed commitment to an open environment for inward and outward FDI and the implementation of policies aimed at promoting investment and innovation are key issues in this respect.
INTRODUCTION:-
The current global financial crisis has its roots in the US, Europe and other advanced countries. Its proximate causes include sub-prime lending, faulty distribution models, unsustainable financial engineering and derivatives usage, and faulty credit rating by agencies, a lax regulation and large global imbalances in those countries. But the
ABSTRACT:-
The year 2008 marked the end of a growth cycle in international investment that started in 2004 and saw world foreign direct investment (FDI) inflows reach a historic record of $1.9 trillion in 2007. Since then FDIs have been decreasing. The fall in global FDI in 2008–2009 is the result of two major factors affecting domestic as well as international investment. First, the capability of firms to invest has been reduced by a fall in access to financial resources, both internally – due to a decline in corporate profits – and externally – due to the lower availability and higher cost of finance. Second, the propensity to invest has been affected negatively by economic prospects, especially in developed countries that are hit by the most. The setback in FDI has particularly affected cross-border mergers and acquisitions (M&As), the value of which was in sharp decline in 2008 and early 2009 as compared to the previous year’s historic high. It has also taken the form of a rising wave of divestments and restructurings.
Nevertheless, some favorable factors for FDI growth are still at work, some of which are even a consequence of the crisis itself. Public policies will obviously play a major role in the restoration of favourable conditions for a quick recovery in FDI flows. Structural reforms aimed at ensuring more stability in the global financial system, renewed commitment to an open environment for inward and outward FDI and the implementation of policies aimed at promoting investment and innovation are key issues in this respect.
INTRODUCTION:-
The current global financial crisis has its roots in the US, Europe and other advanced countries. Its proximate causes include sub-prime lending, faulty distribution models, unsustainable financial engineering and derivatives usage, and faulty credit rating by agencies, a lax regulation and large global imbalances in those countries. But the
Bibliography: • UNCTAD Investment Brief, Global FDI in Decline due to the Financial Crisis, and a Further Drop Expected, November 1, 2009 • Does Foreign Direct Investment Promote Development?, Theodore H • World Investment Prospects Survey, 2008–2011 (UNCTAD, 2008a) • Press notes of 2009 ,Government of India Ministry of Commerce & Industry