Foreign Direct Investment in African Countries
Added on 2021-05-31
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Running head: INTERNATIONAL BUSINESS THEORY AND PRACTICE1International business theory and practiceName:Institution:
INTERNATIONAL BUSINESS THEORY AND PRACTICE2IntroductionIn the past 15 years, investors from developing nations have explored unfamiliar territories for the possibilities of investing until finally settling on developing African nations. The expenses and profits of Foreign Direct Investment in African countries have brought up a discussion among policy-makers and investors (Drogendijk & Blomkvist, 2013, pp.75). This is due to diversity in understanding the true intentions of the foreign governments with some believing that they are working on a tactic to gain a deliberate toehold economically in the regionwhile others appreciating the benefits brought through the combination of business practices and employment opportunities produced. This paper analyses how FDI has developed among developed countries while specifically looking at China’s involvement in OFDI. According to the Cassidy (2017), globally, China is third in global overseas investors list, closely following United States and Japan (pp. 17). She is also the distinct highest supplier of an outward venture in rising nations. In 2012, China produced seventy-three companies in the Fortune 500 list. As of2017 in the stock list of FDI abroad, China had invested 1,342 Trillion U.S. Dollars in foreign countries (Xia, Ma, Lu, & Yiu, 2014, pp. 1344).Push and pull factors of FDINew markets; this has been promoted by the search for new markets with less competition and hence the possibility for a high-profit prospective (Drogendijk&Blomkvist, 2013, pp.77).Technological advancements; global markets and partnerships coupled with foreign acquisitions are more profitable to Chinese companies. This is due to the increased competition in the local market in developing new technologies.
INTERNATIONAL BUSINESS THEORY AND PRACTICE3Rich resources: China’s demand for oil and minerals is satisfied by richnaturalresources-rich countries for instance Zambia’s copper mining industry (Drogendijk & Blomkvist, 2013, pp.78). This is due to her development in technological advancements and desire to satisfy her huge market demands. The minerals are both from local enterprises or exported from foreign developing countries like Zambia. The Chinese Collum Mine at the Old Nkandabbwe mine in the district of Sinazongwe has been operational since 2003 while in 2005; a privately owned Chinese firm purchased a 4 million tons manganese deposits mine in Kabwe, an old industrial base in Zambia (Drogendijk&Blomkvist, 2013, pp.79).Financial reforms taken by some nations such as liberalization in commerce and investment guidelines, privatization of SOE’s and lack of trade regulations are very attractive to the Chinese FDI policy(Xia et al., 2014, pp. 1347). This is because small and medium companiesdo not have enough resources to effectively monitor workers affairs and hence they are exploitedby investors.Poor infrastructure and transport system in developing countries provide the Chinese investors with an opportunity to invest in them while promoting their developed skills and industrial advancements in building and construction.Cheap labour services; China explores new trade ventures and the cheap readily availablelabour force provided by poor developing countries is very beneficial for the mass production of profits. Her high population also provides the needed manpower in the development of outward FDI (Xia et al., 2014, pp. 1349).
INTERNATIONAL BUSINESS THEORY AND PRACTICE4OFDI trends on emerging countriesThe past decade has seen a rise in economic conditions of two major countries in the world namely China and India due to FDI. This growth has consequently affected the gross domestic product of the BRIC countries (Xia et al., 2014, pp. 1351). India; FDI has been mainly promoted by her enormous investment in the agricultural area; with countless changes put implemented (Stoian, 2013, pp.617). This growth has led to the rebuilding of India's financial system and promoted open-minded economic improvements in thenation such as lessening of business obstacles, decreasing direct tariff and removal of licenses(Pradhan, 2017, pp. 114). FDI in India takes two routes. The automatic route allows foreign investors to freely spend in the country without seeking authorization from the government. Government route requires an investor to seek government’s approval through the Foreign Investment Promotion Board (Pradhan, 2017, pp. 119).China; she is the highest performer in all areas related to FDI. Policies have been put in place from the early 90's to transform and develop Western and North-East regions of the country. Such policies include ‘Strategy of reviving Rusty Industrial Bases' and ‘Develop China's west at full blast' help attract large amounts of FDI (Lv&Spigarelli, 2015, pp. 17). China's Guiding Directory has four projects namely; encouraged projects, allowed projects, controlled projects and forbidden projects. She has three policies; compulsory, voluntary and neutral which help increase her exports capacity. FDI in China has been promoted by her low labour costs and capacity to be a production base, a fact which attracts many firms to China(Drogendijk & Blomkvist, 2013, pp.81). Her inward FDI is way more productive than her outward FDI hence her regime is working hard to balance the equation(Hu & Cui, 2014, pp.
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