Why Might The Rapid Expansion Of Trade And Foreign Direct Investment Essay

Why Might The Rapid Expansion Of Trade And Foreign Direct Investment In The Asia peaceful Be The Main Driver Of Economic Change In The Asia Pacific - Essay ExampleFDI-induced trade is an important component of global dividing line of the multinational companies. Kawai and Urata (2002) states that at the time of pre-crisis miracle period, the percentage share foreign trade in the (GDP) gross domestic product was significantly higher for upcoming merchandise economies in Asia Pacific than for other emerging economies in other parts of the globe. Generally, new developments have been experienced in the international economic activities of the Asia Pacific economies since 1980s. For example, among 1980 and 1977, the share of East Asias foreign trade in GDP increased at significantly greater rates. Currently, the region is more economically structured with other parts of the world than with itself. Since FDI and trade are more of complementary to each other than substitutes, large i nflows of FDI to Asia Pacific have increased the regions participation in international trade. A combination of FDI and international trade has therefore become the main driver of economic change in the Asia Pacific. The swot in the levels of FDI in Asia Pacific can be attributed improved regional and global economic environment. For example, emergence of global markets and globally integrated production, accelerated technical change and existence of enthronization treaties between Asia Pacific and other countries. There are other reasons why the rapid expansion of trade and FDI in the Asia Pacific might be the main driver of economic change in the Asia Pacific. First, there has been reduced lending from commercial banks due to debt crisis. This has caused economies of the Asia Pacific to reform their investment policies so as to attract foreign capital. The economic changes can therefore be linked to economic benefits gained from FDI as an attractive alternative to loans from com mercial bank. Moran (1998) observes that FDI is the nearly stable and strong source of external finance for countries that are developing in the Pacific and Asian regions. In agreement with this, Rajan (2005) states that FDI is a source of adjunct capital that is productive. This therefore denotes that it is a scarce source of capital in terms of deep structural changes of an economy. Rajan (2004) and Nunnenkamp (2004) point out that FDI is an forward-looking form of international cooperation. It is therefore one of the most effective ways of integration and transforming a local/national economy into a global one. One of the major advantages of FDI is that it helps in facilitating economic development of the body politic where the investment is done. In other words, the host country. This scenario is mainly applicable for developing economies like that found among countries comprising the Asia Pacific. FDI normally favours an increase in the foreign-trade turnover of the receivi ng country, lead to diversity of production, technical and scientific collaboration forms, and expansion trade in volume. This is to say that the higher levels of FDI in a country, the higher the chances of that country engaging foreign trade. Such multinational companies will be exporting their produce to other global markets. FDI flows that are induced/stimulated by international corporations (TNCs) investing in Asia Pacific have had great economic significance in the region. They have brought in technological know-how, attracted capital flows, created global production networks, and introduced advanced managerial,