FDI in Africa - IBM #2 assignment

1. What are some of the benefits FDI could bring to Africa? Some global institutions said that FDI could bring better economic development to Africa. Furthermore, particular country governments see FDI could astounded their lack of resource, especially for capital and entrepreneurship. It might be in the form of providing access to foreign markets, as a source of efficient managerial techniques, maybe a vehicle for the transference of technology and innovation, and it could be act as employment generation. 2. Why have the African economics ministers sought to establish a free trade zone. Are there any disadvantages in such an organizing structure? Aside of bringing benefits that African country could get from applying the FDI, economics ministers there also have particular main goal in establishing this free trade zone. It is to make easier for foreign investors to move capital, goods, and services among African nations. There are several disadvantages from this free trade zone agreement. First, businesses in free trade zones are not charged customs duty on the goods that they sell there. This means that the government loses large sums of money which could have gone to the exchequer. Second, free trade zones increase the chances of goods being sneaked into the free trade zones to avoid the payment of taxes. Although goods that are sold in these zones are clearly labeled, fraudsters are able to bring into the zones goods that do not qualify to be sold there. Lastly, free trade zones have presented an avenue for money laundering. 3. Why do you suspect that the telecommunication companies are entering Africa? Are they first movers in a unifying attempt? Are there other sectors that serve that same function? If so, which are they and what function do they serve?

We can clearly see the reason behind the huge expansion of telecommunication companies to Africa. Africas lack of installed infrastructure is the most important reason, the industry will grow dramatically as well as very differently than in other markets. But telecommunication sector isnt the only movers in a unifying attempt. There are also several basic infrastructure sectors that also take role on it which are transportation, banking, health, and education. Their functions can be clearly seen; providing transportation which is very vital to development continents like Africa, providing payments service, providing decent health service for citizens, and providing better education for Africans. 4. After reading this closing case and the other sections of the textbook in your judgment does foreign direct investment benefit a host nation? Explain your reasoning. There are 4 primary benefits that FDI bring to its host nation. They are arising from resourcetransfer effects, employment effects, balance-of-payments effects, and effects on competition and economic growth. Resource-transfer effects could be reached by the positive contribution of FDI by supplying capital, technology, and management resources that would else not be available without it, and boost countrys economic growth rate. Then, FDI will also bring jobs to a host country that would otherwise not be created there (employment effect). Next, a country balance-of-payments accounts track both its payments to and its receipts from other countries. So government could know whether their country is running deficit or surplus on the current account of their balance of payments, then taking action. Last, FDI could bring the long-term results that might include increased productivity growth, product and process innovations, and greater economic growth.