Why we need to comprehend Foreign Direct Investment in international concept?

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2020-04-08 17:01 GMT+8

General public have been always puzzled by this question:why FDI is important or not important to life of Mongolians. The views are different not only by the academics but also between policy makers. In order to comprehend this question we really need to gain the current and pre-existing international developments of the FDI rather than just guessing.

The remarkable expansion in FDI is having very substantial impact both on patterns of economic growth of individual business enterprises and on the national economies of investing and recipient countries (John H. Dunning, 1970). The most profound effect has been witnessed in developing countries where yearly foreign direct investment flows have increased from an average of less than $10 billion in the 1970’s to a yearly average of less than $20 billion in the 1980’s, to explode in the 1990s from $26.7billion in 1990 to $179 billion in 1998 and $208 billion in 1999 and now comprise a large portion of global FDI. (P. Graham; R.Barry Spaulding, 2016). With the right policy framework, FDI can provide financial stability, promote economic development and enhance the wellbeing of societies (OECD benchmark definition of foreign direct investment 4th edition 2016).

Even though there is a conflicted position on FDI influence on economic growth of the host country, the aim of these series are not to argue in what extent FDI promotes the economic  development or not at all.

Some acedemics has a different view on FDI. On the basis of empirical studies, to name a few, do not agree that FDI influences the host country’s economic growth.       Some authors stress that there is still no consensus on the degree of these effects (Blomström and Kokko, 1998; Lim, 2001). Also Pessoa (2007) and Wang (2009) reported that the main conclusion to be drawn from several studies is that results are ambiguous. Among the studies that have concluded that FDI does not cause economic growth are those of Haddad and Harrison (1993), Grilli, Milesi Ferretti (1995) and Javorcik (2004). However, as Vissak and Roolaht (2005) pointed out, the number of studies that show positive effects of FDI is much higher than those that focus on negative effects. Do you consider the FDI is not paying off in Mongolia? Then you conduct your own empirical research!

Even though there is a conflicted position on FDI influence on economic growth of the host country, the aim of these series are not to argue in what extent FDI promotes the economic  development or not at all; but rather to get a better understanding of the international legal and economic aspect of the FDI.

The only existing fact is that developing countries seek to attract FDI for economy development while multinational corporations seek to invest in order to reach available and affordable resources for economies of scale.

Mongolia experienced an inward FDI peak thanks to its rich unexplored natural resources but equally experienced a dramatic fall of the FDI due to unacceptable changes in national legislation resulting in foreign investors leaving the country. The inward FDI in Mongolia has been affected by global commodity price slumps which is one of the external factor, further, FDI has been adversely affected by internal factors created by inappropriate short term political decisions in form national laws. Do we really comprehend the significance of the FDI? Do we really ‘’dig enough deep’’ FDI in international legal and economic concepts and brainstormed how  Mongolians can achieve the best results in all aspects? Generally, the role of the FDI considered as of important to Mongolian sustainable long term economic development, however without acknowledging the the international legal framework and non-legal relevant aspects  (but not limited to by these factors only) a gap will be always there.

These series of eight  publishing will address the significance of international investment law and case law  which is unavoidable for delivering appropriate policy to attract FDI. Their presence and future developments are still not only  important international lawyes but also to policy makers. The sole legal knowledge practically not enough to understand the final cutting edge which is the economic achievements. Indeed, will introduce some FDI economic theories and what kind of methodologies are taken by the states to surge the positive outcomes to the economy of the host state will be presented as well. Perhaps helpful find or you explore more to answer the question: why FDI is important or not important to life of Mongolians.

Lawyer G.Khaliun  (LLM, MBA)

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