Foreign Direct Investment

Transcription

1 Foreign Direct Investment 8 Learning objectives Recognize current trends regarding FDI in the world economy. Explain the different theories of foreign direct investment. Understand how political ideology shapes a government s attitudes towards FDI. Describe the benefits and costs of FDI to home and host countries. Explain the range of policy instruments that governments use to influence FDI. Identify the implications for management practice of the theory and government policies associated with FDI. 7 The focus of this chapter is foreign direct investment (FDI). The growth of foreign direct investment in the last 25 years has been phenomenal. FDI can take the form of a foreign firm buying a firm in a different country, or deciding to invest in a different country by building operations there. With FDI, a firm has a significant ownership in a foreign operation and the potential to affect managerial decisions of the operation. The goal of our coverage of FDI is to understand the pattern of FDI that occurs between countries, and why firms undertake FDI and become multinational in their operations as well as why firms undertake FDI rather than simply exporting products or licensing their know-how. The opening case explores Wal-Mart s investment in Japan. Wal-Mart s initial venture into Japan has been challenging and has forced the company to change its approach to better compete with local retailers and meet the needs of Japanese consumers. The closing case describes the international growth of Spain s Telefonica. Until the 1990s, Telefonica was a typical state-owned firm. Today, it has expanded into Latin America and Europe. 8-1

2 OUTLINE OF CHAPTER 8: FOREIGN DIRECT INVESTMENT Opening Case: Wal-Mart in Japan Introduction Foreign Direct Investment in the World Economy Trends in FDI The Direction of FDI The Source of FDI The Form of FDI: Acquisitions versus Greenfield Investments The Shift to Services Country Focus: Foreign Direct Investment in China Theories of Foreign Direct Investment Why Foreign Direct Investment? The Pattern of Foreign Direct Investment The Eclectic Paradigm Management Focus: Foreign Direct Investment by Cemex Political Ideology and Foreign Direct Investment The Radical View The Free Market View Pragmatic Nationalism Shifting Ideology Management Focus: DP World and the United States Benefits and Costs of FDI Host Country Benefits Host Country Costs Home Country Benefits Home Country Costs International Trade Theory and FDI Government Policy Instruments and FDI Home Country Policies Host Country Policies International Institutions and the Liberalization of FDI Implications for Managers The Theory of FDI Government Policy Chapter Summary Critical Thinking and Discussion Questions Closing Case: Spain s Telefonica 8-2

3 CLASSROOM DISCUSSION POINT Ask students for examples of foreign firms that have invested in the U.S. Jot them down on the board. Then, discuss why these companies invested in the U.S. Try to follow the framework presented in the text, and refer back to the board during the presentation of the material. Next, explore what the investment means for the U.S. OPENING CASE: Wal-Mart in Japan The opening case explores Wal-Mart s investment in Japan. For years, Japan has been relatively closed to significant foreign direct investment, but more recently the government has changed its policy and actually now encourages inward investment. Wal-Mart, taking advantage of this shift in policy, acquired a large Japanese retailer in Wal-Mart s initial venture into Japan has been challenging and has forced the company to change its approach to better compete with local retailers and meet the needs of Japanese consumers. Discussion of the case can revolve around the following questions: 1. How would you characterize Wal-Mart s investment in Japan? Why was Japan an attractive destination for the company? 2. Why did Japan change its position on inward foreign direct investment? How will Wal-Mart s investment benefit Japan? 3. Discuss the strategic changes Wal-Mart s Japanese rivals are making in response to the entry of Wal-Mart. What does this tell you about the power of Wal-Mart? What changes has Wal-Mart had to make to attract Japanese consumers? What can Wal-Mart learn from this experience? Another Perspective: Wal-Mart s web site is available at { Another Perspective: Wal-Mart has also been trying to make inroads into India, but has been blocked by the government. To learn more about the company s challenges in this market go to { LECTURE OUTLINE This lecture outline follows the Power Point Presentation (PPT) provided along with this instructor s manual. The PPT slides include additional notes that can be viewed by 8-3

4 clicking on view, then on notes. The following provides a brief overview of each Power Point slide along with teaching tips, and additional perspectives. Slides What Is Foreign Direct Investment? Foreign direct investment (FDI) occurs when a firm invests directly in new facilities to produce and/or market in a foreign country. Once a firm undertakes FDI it becomes a multinational enterprise. Another Perspective: Each year Fortune magazine publishes a list of the 500 largest global corporations in the world. Fortune calls its list the "Global 500." This list can be accessed at { The article contains an excellent discussion of the role of global firms in the world economy. FDI can take the form of a greenfield investment where a wholly new operation is established in a foreign country, or it can take place via acquisitions or mergers with existing firms in the foreign country. Another Perspective: Another web site that provides an excellent discussion of the role of multinational corporations in the world economy is available at { The flow of FDI refers to the amount of FDI undertaken over a given time period, while the stock of FDI refers to the total accumulated value of foreign-owned assets at a given time. Outflows of FDI are the flows of FDI out of a country, and inflows of FDI are the flows of FDI into a country. Slides Trends in FDI There has been a marked increase in both the flow and stock of FDI in the world economy over the last 30 years. While the United States remains a top destination for FDI flows, South, East, and Southeast Asia, and particularly China, are now seeing an increase of FDI inflows, and Latin America is also emerging as an important region for FDI. Another Perspective: FDI in China continues to be strong, and India is emerging as another hotspot for FDI. To learn more about these markets go to { and { in-january.html}. Another Perspective: In contrast to China and India, Britain and the EU countries in general are seeing inward FDI drop. A similar trend can be found in the United States. To learn more about these trends go to { 8-4

5 Slides The Source of FDI Since World War II, the U.S. has been the largest source country for FDI. The United Kingdom, the Netherlands, France, Germany, and Japan are other important source countries. Slides The Form of FDI: Acquisitions Versus Greenfield Investments Most cross-border investment is in the form of mergers and acquisitions rather than greenfield investments. Slides Why Foreign Direct Investment? Why do firms choose FDI instead of exporting or licensing? Internalization theory (also known as market imperfections theory) suggests that licensing has three major drawbacks. Slides The Pattern of Foreign Direct Investment Knickerbocker looked at the relationship between FDI and rivalry in oligopolistic industries (industries composed of a limited number of large firms) and suggested that FDI flows are a reflection of strategic rivalry between firms in the global marketplace. Vernon argued that firms undertake FDI at particular stages in the life cycle of a product they have pioneered. According to the eclectic paradigm, in addition to the various factors discussed earlier, it is important to consider: location-specific advantages - that arise from using resource endowments or assets that are tied to a particular location and that a firm finds valuable to combine with its own unique assets and externalities - knowledge spillovers that occur when companies in the same industry locate in the same area Slides Political Ideology and Foreign Direct Investment Ideology toward FDI ranges from a radical stance that is hostile to all FDI to the noninterventionist principle of free market economies. Between these two extremes is an approach that might be called pragmatic nationalism. The radical view argues that the MNE is an instrument of imperialist domination and a tool for exploiting host countries to the exclusive benefit of their capitalist-imperialist home countries. According to the free market view, international production should be distributed among countries according to the theory of comparative advantage. Pragmatic nationalism suggests that FDI has both benefits, such as inflows of capital, technology, skills and jobs, and costs, such as repatriation of profits to the home country and a negative balance of payments effect. 8-5

6 Recently, there has been a strong shift toward the free market stance creating: a surge in FDI worldwide an increase in the volume of FDI in countries with newly liberalized regimes Slides Host Country Benefits of FDI Government policy is often shaped by a consideration of the costs and benefits of FDI. There are four main benefits of inward FDI for host countries: resource transfer effects; employment effects; balance of payments effects, and effects on competition and growth. Slides Host Country Costs There are three mains costs from inward FDI for the host country: the possible adverse effects of FDI on competition within the host nation; adverse effects on the balance of payments; and the perceived loss of national sovereignty and autonomy. Slide 8-25 Home Country Benefits The benefits of FDI for the home country include: the effect on the capital account of the home country s balance of payments from the inward flow of foreign earnings; the employment effects that arise from outward FDI; and the gains from learning valuable skills from foreign markets that can subsequently be transferred back to the home country. Slides Home Country Costs The home country s balance of payments can suffer from the initial capital outflow required to finance the FDI; if the purpose of the FDI is to serve the home market from a low cost labor location; and if the FDI is a substitute for direct exports. International trade theory suggests that home country concerns about the negative economic effects of offshore production (FDI undertaken to serve the home market) may not be valid. Slide Government Policy Instruments and FDI Home countries and host countries use various policies to regulate FDI. Another Perspective: The World Bank offers information on the business environment in different countries. To explore the information, go to { click on countries, and select the country in question. Governments can both encourage and restrict FDI Another Perspective: India has recently revised its regulations regarding FDI raising concerns among some analysts. To learn more about India s new regulations go to { To encourage inward FDI, governments offer incentives to foreign firms to invest in their countries, while they restrict inward FDI through ownership restraints and performance requirements. 8-6

7 Slide 8-30 International Institutions and the Liberalization of FDI The World Trade Organization is trying to establish a universal set of rules designed to promote the liberalization of FDI. Slides Implications for Managers Managers need to consider what trade theory implies, and the link between government policy and FDI. The direction of FDI can be explained through the location-specific advantages argument associated with John Dunning. A host government s attitude toward FDI is an important variable in decisions about where to locate foreign production facilities and where to make a foreign direct investment. CRITICAL THINKING AND DISCUSSION QUESTIONS QUESTION 1: In 2004, inward FDI accounted for some 24% of the gross fixed capital formation in Ireland, but only 0.6% in Japan. What do you think explains the difference in FDI inflows into the two countries? ANSWER 1: One approach to this question is to look at government policy: Ireland is FDI-friendly while Japan has discouraged inward FDI. Both are trade-dependent economies with few natural resources, but Ireland appears far less mercantilist in attitude than does Japan. Ireland has a well-educated, relatively low cost workforce and an abundant supply of labor, while Japan s workforce, also well-educated, is expensive. QUESTION 2: Compare and contrast these explanations of FDI: internalization theory, Vernon's product life cycle theory, and Knickerbocker's theory of FDI. Which theory do you think offers the best explanation of the historical pattern of FDI? Why? ANSWER 2: Knickerbocker's theory suggests that firms imitate other firms in oligopolistic industries, and will "follow the leader" in undertaking FDI in certain countries, as sort of strategic defensive moves. This theory does not explain why the first firm undertakes FDI nor why it chooses to do this rather than to export or license. The product life cycle theory suggests that firms invest in foreign countries when demand in that country will support local production or when cost pressures make it necessary to locate production in low cost locations. While this theory does explain why some FDI takes place, it does not explain why FDI is preferred over licensing or exporting. The market imperfections explanation more directly confronts these issues, and explains why FDI may be preferable to other alternatives for expanding business activities. It identifies the importance and difficulty of transferring know-how and describes some of the impediments to exporting. By explaining better exactly why a firm may undertake FDI, the market imperfections model is probably the best explanation of the historical pattern of horizontal FDI. 8-7

8 QUESTION 3: Read the Management Focus on Cemex and then answer the following questions: a) Which theoretical explanation, or explanations, of FDI best explains Cemex s FDI? b) What is the value that Cemex brings to the host economy? Can you see any potential drawbacks of inward investment by Cemex in an economy? c) Cemex has a strong preference for acquisitions over greenfield ventures as an entry mode. Why? d) Why do you think Cemex decided to exit Indonesia after failing to gain majority control of Semen Gresik? Why is majority control so important to Cemex? e) Why do you think politicians in Indonesia tried to block Cemex s attempt to gain majority control over Semen Gresik? Do you think Indonesia s best interests were served by limiting Cemex s FDI in the country? ANSWER 3: a) Cemex is a cement company. Consequently, exporting is difficult because of the weight of the product. If Cemex wants to expand into new markets, the company would either need to license a local company or make an investment in the market directly. Cemex s success is due in part to its top notch customer service, and relationship with distributors. Because these advantages could be difficult to transfer, the company will probably choose to invest directly. Students should reflect on these factors as they consider the various theories to explain Cemex s FDI. b) Cemex is the third largest cement company in the world, and a powerhouse in Mexico where it controls 60 percent of the market. Cemex is highly focused on efficient manufacturing and customer service. Distributors are rewarded for their sales, as are users. The primary benefit Cemex brings to host countries involves these competitive advantages. Cemex acquires companies and then transfers technological, management, and marketing know-how to the new units, improving their performance. The company has brought several acquired companies back to full production, increasing employment opportunities in the host country as well. c) Cemex has successfully acquired established cement makers in many countries. By acquiring companies rather than establishing them from the ground up, Cemex can avoid some of the delays that could occur in the start-up phase, while at the same time, capitalize on the benefits of an established market presence. d) Much of Cemex s success appears to be built around its customer service and attention to distributors. Indeed, it could be argued that what sets Cemex apart from its competitors, or its competitive advantage, is its superior way of dealing with external stakeholders. It is significantly easier to duplicate this sort of advantage in a wholly owned operation than in a joint venture or through licensing arrangements. e) In 2006, Cemex announced that it would be pulling out of Indonesia. Cemex entered the Indonesian market in 1998, as part of an IMF sponsored privatization program. Cemex purchased a 25 percent stake in Semen Gresik, a government owned cement maker. Cemex s decision to pull out was a result of a dispute with the Indonesian government. When Cemex has entered the market, it had been promised a majority position in Semen Gresik in However thanks to the efforts of various special interest groups, permission was never granted. Whether the decision to pull out was in the best interests of the country is difficult to say. Certainly it would seem that Semen 8-8

9 Gresik could learn from Cemex, and utilize its knowledge to improve its own operations. However, allowing a foreign company to control an industry that is necessary to a country could be detrimental to the nation. Another Perspective: Cemex s web site is available at { QUESTION 4: You are the international manager of a US business that has just invented a revolutionary new personal computer that can perform the same functions as existing PCs but costs only half as much to manufacture. Several patents protect the unique design of this computer. Your CEO has asked you to formulate a recommendation for how to expand into Western Europe. Your options are (a) to export from the US, (b) to license a European firm to manufacture and market the computer in Europe, and (c) to set up a wholly owned subsidiary in Europe. Evaluate the pros and cons of each alternative and suggest a course of action to your CEO. ANSWER 4: In considering expansion into Western Europe, an international manager might consider three options: FDI, licensing, and export. With export, assuming there are no trade barriers, the key considerations would likely be transport costs and localization. While transport costs may be quite low for a relatively light and high value product like a computer, localization can present some difficulties. Power requirements, keyboards, and preferences in models all vary from country to country. It may be difficult to fully address these localization issues from the US, but not impossible. Since there are many computer manufacturers and distributors in Europe, there are likely to be a number of potential licensees. But a licensing arrangement implies that valuable technological information may have to be disclosed and that the firm s competitive advantage may be lost if the licensees uses or disseminates this proprietary knowledge improperly. FDI (setting up a wholly owned subsidiary) is clearly the most costly and time consuming approach, but the one that best guarantees that critical knowledge will not be disseminated and that localization can be done effectively. FDI will also place you in the market into which you want to sell and allow you to be near the consumer. Given the fast pace of change in the personal computer industry, it is difficult to say how long this revolutionary new computer will retain its competitive advantage. If the firm can protect its advantage for a period of time, FDI may pay off and help assure that critical knowledge is not lost. If the innovation is not core and can be easily copied, then licensing would allow the firm to get the quickest large scale entry into Europe and make as much as it can before losing advantage. CLOSING CASE: Spain s Telefonica Summary The closing case explores the international growth of Telefonica, a Spanish telecommunications firm. For decades, Telefonica had operated as a typical state-owned enterprise, but privatization and deregulation changes that path in the 1990s. Telefonica began to aggressively pursue expansion opportunities in Latin America where it quickly became the number 1 or 2 player in nearly every country. Later, Telefonica turned its sights on Europe where 8-9

10 its acquisitions helped transform the company into the second biggest mobile phone operator in the world. Discussion of the case can revolve around the following questions: QUESTION 1: What changes in the political and economic environment allowed Telefonica to start expanding globally? ANSWER 1: Telefonica began as a state-owned company, but was privatized in the 1990s when Spain deregulated its telecommunications market. Privatization placed new importance on keeping costs low, developing new technologies, and increasing shareholder value. In order to achieve these goals, Telefonica began to explore new markets where growth opportunities were strong. Latin America was its first target. Like Spain, Latin America was in the process of deregulation and privatization. This together with its rapid adoption of new telecommunications services made it an attractive destination for Telefonica. QUESTION 2: Why did Telefonica initially focus on Latin America? Why was it slower to expand in Europe, even though Spain is a member of the European Union? ANSWER 2: Telefonica initially focused on Latin America because the market was growing rapidly and more people were using mobile phones and Internet connections. In addition, as a former state-owned company that had been privatized, Telefonica s experience was valuable in the region which was also in the process of privatization. Telefonica was slower to expand in Spain because of the tacit agreement that existed among companies to avoid entering each other s markets. In fact, Telefonica only began its European expansion after France Telecom acquired Britain s O2. QUESTION 3: Telefonica has used acquisitions rather than greenfield ventures as its entry strategy. Why do you think this has been the case? What are the potential risks associated with this entry strategy? ANSWER 3: Many students will probably attribute Telefonica s preference for expansion via acquisition as opposed to greenfield ventures to speed to market. By acquiring existing operations, Telefonica already has a customer base in place along with the necessary support structure. In contrast, a greenfield venture would require a much longer time frame. However, a greenfield venture would allow Telefonica to build its operations exactly how it wants them rather than working with the existing operations both good and bad that comes with an acquisition. QUESTION 4: What is the value that Telefonica brings to the companies that it acquires? ANSWER 4: Telefonica is the second largest mobile phone operator in the world. Most students will probably recognize that this gives Telefonica considerable power in the marketplace. Telefonica can offset losses in one country with profits in another. This gives Telefoncia far more strategic options than a smaller company might have. In addition, the company can gain considerable scale economies by operating in multiple countries simultaneously. Some students may also point out that Telefonica brings new skills and experience to the companies it acquires helping them become stronger units. 8-10

11 QUESTION 5: In your judgment, does inward investment by Telefonica benefit a host nation? Explain your reasoning. ANSWER 5: Most countries typically welcome investment by companies. Such investments usually bring new jobs, capital, and other benefits like infrastructure improvements and technology to the host country. Most students will probably agree that Telefonica s investments brought some of these same benefits. In fact, Telefoncia s presence probably contributed to the overall growth and prosperity in the host market through increased competition and lower prices on telecommunications services. At the same time however, it is important to recognize that such investments can be detrimental to a host country. Some jobs may be lost due to increased competition, for example, or local companies may find it hard to survive. Another Perspective: Telefonica recently reorganized its European division. For more information on the company s new strategic initiatives go to { To learn more about Telefonica, go to the company s web site at { INTEGRATING iglobes There are several iglobe video clips that can be integrated with the material presented in this chapter. In particular, you might consider the following: Title: Ireland s New Leader Wrestles With Lingering Debt Problems, EU Bailout Run Time: 5:23 Abstract: This video explores the efforts of Ireland s new Prime Minister Enda Kenny to jump start the nation s economic recovery and reestablish the country as an attractive destination for investment. Key Concepts: European Union, economic integration, political economy, foreign direct investment, country risk, global economy, euro, International Monetary Fund, globalization Notes: Just eight days into the job, Ireland s new Prime Minister Enda Kenny, was already meeting with U.S. President Barack Obama in the hopes of drumming up new investment from U.S. firms. Enda Kenny takes on the role of Irish Prime Minister following a complete collapse of the country s economy. After growing rapidly for more than a decade and becoming a poster child for economic success, Ireland suddenly found itself back in economic chaos in 2008 when its speculative real estate market burst, and it 8-11

12 banks were on the brink of collapse. In fact, the country s banks survived only because the government pumped billions of euros into the system in order to avert total disaster. Even so, Ireland was forced to ask for a bailout from the European Union and the International Monetary Fund. Now the hope is that new leadership will help give Ireland a new lease on life and a chance to make a comeback. During its boom years in mid-1990s, Ireland was the place to be. Some 600 U.S. multinationals made investments in the country and brought with them the jobs, capital, and technology that helped make the country an economic success. After the country s financial crisis though, investment flows slowed and even reversed. Now, Enda Kenny wants to attract more firms. Kenny sees increased foreign investment as being a vital component in the country s effort to recover from its financial disaster and to that end, has been firm that the relatively low 12.5 percent corporate tax rate for foreign investors will remain unchanged. In addition, Kenny is keen to restore Ireland s international reputation, and is insistent that Ireland will work with U.S. companies that invest in the country. Kenny promises that companies making investments will not be disappointed. Other countries in the European Union however are not happy with Ireland s courting of U.S. firms. France and Germany would like to see Ireland s corporate tax rate higher. They believe that currently it is too low, and effectively gives Ireland s a competitive advantage when it comes to attracting foreign direct investment. While Ireland has maintained that it will not change the rate, it also knows that it cannot isolate itself from other countries in the bloc because it is relying on them for financial assistance. In fact, Ireland is hoping that the European Union will agree to a lower interest rate on its bailout package, a rate Kenny feels is necessary if Ireland is to kick-start its economic recovery. Analysts agree that it is in the best interests of the rest of the European Union to ensure Ireland s financial and economic stability in order to prevent downward pressure on the euro, but so far, Germany and France are demanding some sort of quid pro quo. Discussion Questions: 1. Comment on the controversy over Ireland s corporate tax rate for foreign investors. Why is it so important for Ireland to maintain its current rate? What are the benefits to Ireland of foreign direct investment? 2. In your opinion, does the 12.5 percent tax rate give Ireland an unfair competitive advantage? How do other European Union countries view the situation? 3. Reflect on the drawbacks associated with economic integration. How is the debate between Ireland and other European Union countries over its corporate tax rate been influenced by the fact that the countries are all part of the trading bloc? 4. How would you describe the current investment climate in Ireland? Why does Ireland need investment from U.S. companies? 8-12

13 INTEGRATING VIDEOS There are also several longer video clips that can be integrated with the material presented in this chapter. In particular, you might consider the following from International Business DVD Volume 6: Title: Google Leaves China after Cyber Attacks Learning Objectives The purpose of this video is to help you: Explore the ethical dilemmas facing companies as they operate in foreign markets. Define political risk and identify the macro and micro risks that companies face in China. Understand foreign direct investment and recognize what makes a country an attractive destination for investment. Recognize the impact of foreign companies on the host country. Key Words Ethics and social responsibility Foreign direct investment Impact of the multinational company on the host country Political risk Political economy Globalization Synopsis After a string of cyber attacks on the accounts of several prominent human rights activists, Google, the world s most powerful Internet company, made the decision to close its search engine units in China and move them offshore to Hong Kong. While Secretary of State Hillary Clinton demanded a full investigation of the attacks by Chinese authorities, Google announced that it had stopped censoring its search engine services which meant that it would automatically be banned from operating inside the country. The decision to leave the market was not an easy one. With its 384 million users, China was Google s largest market. The relationship between Google and the Chinese government has been fraught with tension from the beginning. In order to gain permission to enter the market in the first place, Google had to agree to limit access to controversial subjects including the Tiananmen Square incident and the Tibet protests. For a company like Google that promotes a don t be evil value system, this was not an easy compromise, and a promise that became impossible to keep once Chinese spies hacked into its system. Now, Chinese citizens, much to the surprise of the government, are protesting the move. Users like Michael Yao, a Harvard-educated Internet junkie who claims to spend some ten hours a day online, say that without Google, they cannot live a modern life. 8-13

14 Google insists that it did not want to leave the country, especially given the enormous growth potential in the market, but after the cyber attacks it was left with no other choice. Google is not alone in its battle with the Chinese government. Other Internet companies like Twitter, Facebook, and YouTube are also blocked, and some twenty other companies were also attacked at the same time as Google. Now, one is left to wonder what the cost of operating in China really is. Discussion Questions 1. Consider the ethics involved in Google s decision to initially enter, and then later exit, China. Why do you think Google agreed to censor its search results in China? Do you agree with its decision to move its operations to Hong Kong? 2. What does Google s decision to move its operations out of China mean to Chinese citizens? Did Google have a moral obligation to maintain its operations in the country? What were the social consequences of Google s decision to pull out? 3. Reflect on the need for country risk assessments and discuss the risks involved in entering a market where the government is hostile to foreign companies. How should firms assess the risk involved? What variables do you think Google considered when entering China? 4. What can other companies considering entering China learn from Google s experience in the market? INCORPORATING globaledge EXERCISES Use the globaledge site { to complete the following exercises: Exercise 1 The World Investment Report published annually by UNCTAD provides quick electronic access to comprehensive statistics on the operations of the largest transnational corporations. Gather a list of the top 10 non-financial transnational corporations from developing countries. Provide a summary of the countries and industries represented. Do you notice any common traits from your analysis? Exercise 2 An integral part of successful foreign direct investment (FDI) is to understand the target market as well as the nature of the possible investment sector. As such, your energy company is seeking FDI opportunities in Jordan. The Multilaterial Investment Guarantee Agency has been identified as a resource to examine the energy industry internationally. 8-14

15 Based on the information available at this resource, prepare a report indicating recent and important trends relevant to a possible FDI venture in Jordan. Answers to Exercises Exercise 1 The data source can be accessed by searching the term World Investment Report at The link to the World Investment Report is found under the globaledge category Research: Statistical Data Sources. On this website, the list of top transnational corporations in developing countries can be found by searching the documents available for viewing. Be sure to click on the Resource Desk link to search this area of the globaledge website. Search Phrase: World Investment Report Resource Name: UNCTAD: Largest Transnational Corporations Website: globaledge Category: News & Periodicals: Publications Exercise 2 The FDI.net website provides FDI information for emerging markets around the world. This resource can be accessed by searching Multilaterial Investment Guarantee Agency at The link is found under the globaledge category Research: Multi-Country. On this website, information concerning the industry sector and country can be searched on t he left side of the screen. Be sure to click on the Resource Desk link to search this area of the globaledge website. Search Phrase: Multilaterial Investment Guarantee Agency Resource Name: FDI.net Website: globaledge Category: Research: Multi-Country 8-15