International Investment & MNCs

International Investment

 

Where are the investments going?  And why?

Changes in 2009

Emerging Markets (formerly called Newly Industrialized Countries (NICs)

Capital flows to LDCs, another glimpse

Capital flows to LDCs
Source: 
The Economist  6/2/07

2002

2006

169 B

647 B

*$1.9 T in FPI during this time

 

Net FDI flows to Emerging Markets
Source:  The Economist  6/2/07

China

76 Billion

Russia

28 Billion

Turkey

19 Billion

Mexico

18.9 Billion

Brazil

18.8 Billion

Poland

12.6 Billion

Hungary

9 Billion

Chile

8.5 Billion

India

8 Billion

Romania

7 Billion

Record $325 B in 2006 to emerging markets in 2006, an increase of 7.3% from 2005

 

 

 

 

 

 

Multinational corporations

· A business that has subsidiaries outside of its own country-not just about trading abroad

· Has ownership of plants, resource extraction, processing operations, and/or services

· Package of capital, technology, managerial skills, marketing skills

· MNCs are measured in Gross Corporate Product (GCP)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

MNCs use Foreign Direct Investment (FDI) to secure ownership of assets

· MNCs are measured in GCP-gross corporate product (total revenue a company makes in a year)

· MNCs overwhelmingly based in GN

o Fortune 500 MNCs

    -95% are owned by GN

    43% are American or Japanese

    -all but 5% held by EDCs

    -few GS investors in or holders of MNCs

 

 

 

 

 

MNCs have become significant international actors-significant characteristics

1.     Lots of money, power, and mobility to transmit power

2.     Transnationality gives them unbounded mobility

3.     Through wealth and technology can influence jobs and affect growth

4.     They challenge traditionare transmitters of culture and values

5.     Development leads tocompetition, but also leads to disparate distribution of wealth

 

 

 

 

 

 

 

 

 

 

 

 

MNC history:

-Post WWII-Cold War era--LDCs felt threatened by MNCs

-Post-Cold War era, need development, see MNCs as opportunity

-In post CW era, MNCs have helped to internationalize the process of production