Essay on Foreign Direct Investment Inflow: Analysis of ME Countries, India, KSA, UAE

FDI Inflow Analysis (Middle Eastern countries, India, Saudi Arabia, United Arab Emirates, Lebanon, Qatar, etc.)

FDI is an acronym meaning Foreign Direct Investment. Foreign direct investments contribute to the growth of national economies and provide emerging and developing economies with greater access to capital, technology, and workforce. Foreign direct investment's role is critical in the world's economy, both emerging and developing countries as they can benefit from market exposure and funding from the already established global investments(Rogmans& Ebbers, 2013).

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The countries can develop sustainable investments in areas of energy, infrastructure, and infrastructure. The countries can access tools such as technology, skilled workforce and technology through Foreign Direct Investments.

This paper aims to conduct a literature review to compare and contrast the foreign direct investments inflows received by Asian and Middle Eastern countries, discuss factors that attract inflows of foreign direct investments. It will also list top countries in terms of FDI recipient and give observations on FDI inflows between Asia and the rest of the world mainly middle east(Tiwari & Mutascu, 2011).Due to the world's economic and financial integration, there has been an increase in foreign direct investments among the developing countries. Flows to the Arab countries seemed to decrease thus lowering the overall records of foreign direct investments in the countries. Both regions have been favorable destinations to an investor, and they offer investments markets which are quite profitable. The markets feature high demand and labor costs which are rather low.

Foreign direct investments in the regions are relatively lower compared with the economic size of the area. The FDI inflows are lower in Arab countries when compared to the world's developing inflows. Countries in these regions seem to have a lower FDI performance indices in comparison with the other areas(Vijayakumar, Sridharan, & Rao, 2010).Foreign direct investment has proved to contribute to a tiny portion of the overall investments in these regions. Only countries like Jordan seemed to have a gross fixed formation of capital ranging above the average of the developing countries. Investments here are usually domestically financed for example through the banking sectors.

Foreign direct inflows differ widely among the countries in the region. The inflows decrease to oil gulf countries thus occurrence of this diversification in FDI inflows. The diversification in inflows can be said as relatively increasing in recent times due to the emergence of some countries as the region's superpowers.

Different factors that can attract inflows of FDI to Asia

1. Asia is open to regional and international Trade : FDI can be drawn in Asia due to regional and International Trade. Goods from Asia can be sold to different countries within Asia's region and even others which are International. By doing this one can sell products to foreign customers and this ensures that FDI is attracted to Asia( Sahoo, Nataraj & Dash,2014).

2.Asian market and business climate: The market in Asia is favorable for business and has a lot of market for goods produced all over the world. Asia has a lot of people, and its population is of great importance as it acts as a market for products produced across the globe and by doing this the more the Asian market will receive the FDI (Rogmans& Ebbers, 2013).

3.Stability:The market in the Asian market is stable due to political and economic stability. Most countries in Asia are stable both economically and politically, and by this, they attract a lot of FDI from all over the world. This makes the Asian market to continue to prosper day by day due to its stability (Tiwari & Mutascu, 2011)

4. Capital availability: The Asian countries have a lot of capital available, and this attracts a lot of investments from all over the worlds, and this makes it possible to get or accumulate much FDI in Asia than other continents found in the world (Moosa, 2009). Because it is easy to get capital in Asia people, opt to invest in Asia and this makes it possible for more FDI to be accumulated in Asia.

5. Competitiveness; the Asian market is more competitive than other markets in the world, and this makes it possible for FDI to be accumulated. Other markets in the world compete with the Asian market, and the Asian market is strong enough as it attracts more FDI than the different markets.

6. Regulatory environment; The Asian market puts regulations which are aimed to ensure that the market gets more FDI than other firms which are owned privately or from other markets. This ensures that these markets are less affected by the regulations than the markets seeking to enter the markets and those which are not from the Asian market.

Top five countries worldwide that receive the most FDI

Based on the research different countries receive a different amount of FDI. This is due to differences based on the regions they come from or other factors that affect the FDI inflow in different countries. The following are the top five countries that receive the most FDI in the world. They include the Netherlands, United States, United Kingdom, Hong Kong and China (Vijayakumar, Sridharan, & Rao, 2010).

These countries receive different FDIs based on the region they come from and due to the amount of capital invested in these different countries.

Observations about FDI inflows between Asia and the world, and Asia and the Middle East

The FDI inflows between Asia and the world compared in a lot of things. This is because as theft income in the rest of the world continued to drop the FDI inflow in Asia remained stable and to some extent even continued to rise. Various developed countries such as the United States and developing nations such as those in Africa were compared, and the results showed that as the FDI in other countries dropped by different margins the FDI in Asia remained stable and to some extent even continued to rise (Raman, & Agrawal, 2011). The same economy of Asia is also compared to that of the Middle East. It was relatively related as both FDI in the Asian economy and the Middle East compared as they were on the upward trend and they rose day by day. This meant that both of the economies in the Asian market and that of the Middle East were headed in the same direction as they were increasing their FDIs day by day.

References

Ranjan, V., & Agrawal, G. (2011). FDI inflow determinants in BRIC countries: A panel data analysis. International Business Research, 4(4), 255.

Vijayakumar, N., Sridharan, P., & Rao, K. C. S. (2010). Determinants of FDI in BRICS Countries: A panel analysis. International Journal of Business Science & Applied Management (IJBSAM), 5(3), 1-13.

Tiwari, A. K., & Mutascu, M. (2011). Economic growth and FDI in Asia: A panel-data approach. Economic analysis and policy, 41(2), 173-187.

Sahoo, P., Nataraj, G., & Dash, R. K. (2014). Foreign direct investment in South Asia. Policy, Impact, Determinants and Challenges, Springer.

Rogmans, T., & Ebbers, H. (2013). The determinants of foreign direct investment in the Middle East North Africa region. International Journal of Emerging Markets, 8(3), 240-257.

Moosa, I. A. (2009). The determinants of foreign direct investment in MENA countries: an extreme bounds analysis. Applied Economics Letters, 16(15), 1559-1563.