Why Does a Developed Country Focus On Smaller Countries for FDI and Exportations of Products?

In the early 1980s, global FDIflows have been rising quickly — more rapidly than either world exchange or world development and are now credited to approximately 54,000 transnational companies. In 1980–97, the real annual FDI outflow rates for global exports of commodities and non-factor services rose by around 13%, compared with average rates of 7% and world GDP (current prices) for 1980–96.

 For the seventh consecutive year, worldwide FDI inflows rose to some $430-440 billion and outflows for the third consecutive year in 1998. (Global FDI flows determined by annual inflows should, in general, be equal to those calculated by annual outflows;, however, they are not due to variations in national methodology and coverage).

 For developed countries, FDI has developed into a significant source of private foreign financing. The fact that it is driven largely by investors' long-term prospects for making a profit on the development sector, which they personally manage, is somewhat different from other big forms of global private capital movement. By comparison, lending and portfolios of international banks are not invested in bank or fundholders' regulated operations, often driven by short-term gains that can be affected and vulnerable to harsh actions, by different influences (e.g. interest rates).

 Policy mechanisms for FDI are just one determinant of host countries' position of investment. Countries should therefore be mindful of other factors affecting investment decision-making. They emphasize, for instance, continuity between different FDI policies — particularly core FDI policies and trade policies. In addition, a number of reciprocal investment treaties and double-taxation treaties have been signed. At the end of 1997, there were 1,513 mutual investment treaties and 1,794 dual tax treaties, of which 153 were signed in 1997 alone, and 108 were concluded in 1997 alone. Both types of treaties reflect FDI's increasing position in the global economy and the ability of countries to support.

 Nothing new, but these acts, targeted at individual investors and investments in particular in sectors, have proliferated and become more sophisticated. After-investment programs have a huge effect, as they will promote reinvestment by current investors who, if pleased, market the host state and attract additional investment. Financial or fiscal incentives are used often to draw buyers, but they usually only come about while the economic determinants are in play in the investors' position decisions.

 The main determinants for FDI are economic considerations that come to fruition once a policy structure for FDI is in effect. This can be classified into three categories (Table 2): commodities or properties connected to the supply of areas, markets related to products and services, and cost advantages of development. These groups are the following groups: Many of the factors which draw investment to some locations — e.g. ample natural resources, broad host country markets, and low-cost, mobile labor — is still significant, but, as transnational companies, they are increasingly seeking new policies for boosting their competitiveness within the framework of a globalized, liberalizingthe global economy.

 Both policymakers want to attract it because they know that FDI will lead to economic growth. In reality, such investments have a highly competitive global market, and developed countries, in particular, are searching for such investments in order to speed up their efforts to expand. With increased commonplace liberal policy structures and sacrifices of the conventional FDI force, governments concentrate on initiatives to effectively promote them. Nevertheless, economic conditions remain important. The distinctive combination of position benefits and, in particular, generated assets that a country or area could provide potential investors is likely to become more important in the fut