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Multinationals, Asian success and the global economy

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  1. Introduction - Foreign Direct Investment in Southeast Asia.
  2. FDI evolutions in South East Asian countries.
  3. Graph 1: Foreign Direct Investment Flow.
  4. Graph 2: Proportion of FDIs/GDP.
  5. FDIs' impact on the host countries' growth.
  6. FDIs' fallouts on host countries' structures and companies.
  7. Conclusion.
  8. References.

For more than thirty years, Asian countries have known an amazing period of growth, and have now a real and consequent influence on the economic world. However, these countries, like all other developing countries have to face the problem of funding resources in order to develop their economic activity. Indeed, because of their important debts, Asian countries can not turn themselves towards credit operations and the various promises made by different world organizations to help them take time to be realised. Moreover, these potential resources do not represent the same advantages as the Foreign Direct Investments (FDIs) which allow inter-alia technology transfers and procure an easier access to the international market. As a consequence, in a market globalisation context, FDIs have strongly increased since the 90s and are nowadays acting at the heart of the developing countries' economy.

[...] The main motivation for these MNCs for investing in Asian countries is to enhance multinational firm's export competitiveness through the use of cheaper labour market. The export to sales ratio for foreign companies agrees with this phenomenon by standing at more than 60% during the 90s. (UNCTAD,2003) UNCTAD also reported that investment flows to developing Southeast Asia had been directly linked to the creation of export-oriented industries. This has led to rapid growth in the region's manufacturing exports that is to say in Southeast Asian countries. [...]

[...] This refers to net additions to the capital Stock of an economy, including, for example the creation of factories, new machinery, and improved transportation sources. Considered as a private investment, FDI will lead to an increase in total investments and consequently to growth. (Xiaoqin F. and Dickie M., 2004) Moreover, even if it is almost impossible to quantify its impact, FDI leads to growth through indirect channels. Indeed, FDI influences other macro- economics variables as employment, exports, consumption and savings. [...]

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