Global Competitiveness And Foreign Direct Investment 635214

Global Competitiveness And Foreign Direct Investment Fdievery Countr

Global Competitiveness and Foreign Direct Investment (FDI) Every country around the globe is competing for investments by multinational companies. However, before investing in a new facility overseas, each company takes a multitude of factors into account. First, click here to review the latest Global Competitiveness Report from World Economic Forum. Next, do the following: Select one Asian and one African country. Compare and contrast their global business competitiveness. Explain how their global business competitiveness (examples may include: institutions, infrastructure, macroeconomic environment, health and primary education, higher education and training, goods-market efficiency, labor-market efficiency, financial-market development, technological readiness, market size, business sophistication, innovation) affects FDI in these countries. Write a three-to-four-page paper in Word format. Utilize at least two scholarly sources in your research. Apply APA standards to citation of sources.

Paper For Above instruction

In an increasingly interconnected global economy, the attractiveness of a country's environment to foreign direct investment (FDI) is heavily influenced by its level of global competitiveness. Countries with robust institutions, efficient markets, and advanced technological readiness tend to attract higher FDI inflows, contributing to economic growth and development. This paper compares the global competitiveness of one Asian country, Japan, and one African country, Kenya, analyzing how their respective competitiveness factors influence FDI flows.

Japan, a highly developed nation, consistently ranks at the top in global competitiveness reports, owing to its advanced infrastructure, innovative capabilities, and sophisticated business environment. The nation's institutions are characterized by transparency, stability, and effective governance, fostering investor confidence (World Economic Forum, 2023). Its infrastructure—comprising efficient transport, energy, and communication networks—supports business operations and reduces transaction costs. Japan's macroeconomic environment, despite facing demographic challenges, remains stable with low inflation and a disciplined financial sector that facilitates investment activity.

Furthermore, Japan's high level of higher education and training ensures a skilled labor force, essential for its advanced manufacturing and technological sectors. Its innovation capacity is evident through substantial investments in research and development, leading to high levels of business sophistication and technological readiness, which are crucial determinants for attracting FDI (Ashton, 2021). The large domestic market size also appeals to investors seeking to serve the vast Japanese population and access regional markets through the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). Overall, Japan's competitiveness fosters a conducive environment for FDI, especially in high-tech and manufacturing sectors.

In contrast, Kenya, an emerging economy in Africa, displays a different profile in terms of global competitiveness. The World Economic Forum (2023) reports that Kenya ranks lower on many competitiveness pillars, particularly in institutions, infrastructure, and macroeconomic stability. Political stability and governance issues have historically posed risks to investors, although recent reforms have aimed to improve governance standards. Infrastructure deficiencies, including unreliable electricity supply and limited transportation networks, hinder the efficiency of markets and increase operational costs for foreign investors.

Kenya's macroeconomic environment shows promise with relatively stable inflation rates and economic growth, yet challenges remain in financial-market development, with limited access to credit and underdeveloped capital markets (Khan & Njeri, 2022). Its health and primary education systems face challenges, impacting the availability of a healthy, productive workforce. However, Kenya's strategic geographic location and large youthful population offer significant market potential, especially for investments in telecom, retail, and agriculture sectors. Its advances in technological readiness, particularly in mobile banking and digital innovation, have attracted some FDI, especially in fintech.

The disparities in competitiveness between Japan and Kenya directly influence FDI patterns. Japan's strong institutional framework and advanced technological infrastructure make it highly attractive for high-tech investment and innovation-driven FDI. Conversely, Kenya's growth prospects, fueled by market size and technological innovations like mobile banking, attract FDI in sectors aligned with its developmental priorities, such as infrastructure, agriculture, and digital services. However, the overall lower levels of competitiveness can limit the volume and scope of FDI Kenya attracts, especially in capital-intensive sectors.

In conclusion, a country's global competitiveness profoundly impacts its ability to attract FDI. Japan's comprehensive strengths in institutions, infrastructure, innovation, and market sophistication foster a highly appealing investment environment. Meanwhile, Kenya's emerging status, driven largely by market potential and technological innovations, underscores the importance of targeted reforms to enhance competitiveness factors for increased FDI inflows. Policymakers in both countries must focus on strengthening their respective competitive pillars to unlock broader FDI benefits.

References

  • Ashton, J. (2021). Innovation and competitiveness in Japan: A pathway to economic resilience. Journal of International Business Studies, 52(3), 456-470.
  • Khan, S., & Njeri, J. (2022). Financial market development and FDI in Kenya: Challenges and opportunities. African Journal of Economic Review, 10(2), 89-105.
  • World Economic Forum. (2023). The Global Competitiveness Report 2023. Geneva: World Economic Forum.
  • Ayad, M. (2020). The impact of infrastructure on foreign direct investment in emerging markets. International Journal of Economics and Finance, 12(8), 34-45.
  • Johnson, P. (2019). Institutional quality and FDI inflows: Comparative analysis across continents. Journal of World Investment & Trade, 20(4), 543-568.
  • Smith, R. (2022). Technological readiness and investment climate in Africa. Journal of Development Economics, 130, 34-48.
  • Oketch, J., & Mwangi, G. (2021). Digital innovations and economic growth: The case of mobile banking in Kenya. Africa Economic Review, 9(1), 12-29.
  • Chen, L. (2020). Infrastructure investment and economic competitiveness in Asia. Asian Development Review, 37(2), 78-99.
  • World Bank. (2022). World Development Indicators. Retrieved from https://data.worldbank.org
  • OECD. (2021). The Future of FDI: Investment and Competitiveness, OECD Publishing.

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