The global influence of MNCs also increases the importance of understanding international factors. MNCs control much of the world economy and they can have an even greater impact on developing nations. Many of the economies in East Asia have been dramatically transformed because of foreign direct investment (FDI) by MNCs from Europe, the United States, and elsewhere. Currently, FDI represents approximately 30% of the world’s total capital flows. One reason for the growth in FDI relates to its reliability. Compared to other forms of investing such as portfolio investment or short-term lending, FDI seems to be a more stable form of investment. This was demonstrated in the Latin American crises of the early 1980s, the Mexican crisis of 1994, and the Asian crises of 1997. During these times, direct investment inflows remained reasonably steady, while portfolio and other forms of investment dried up or turned negative on net balance
The global influence of MNCs also increases the importance of understanding international factors. MNCs control much of the world economy and they can have an even greater impact on developing nations. Many of the economies in East Asia have been dramatically transformed because of foreign direct investment (FDI) by MNCs from Europe, the United States, and elsewhere. Currently, FDI represents approximately 30% of the world’s total capital flows. One reason for the growth in FDI relates to its reliability. Compared to other forms of investing such as portfolio investment or short-term lending, FDI seems to be a more stable form of investment. This was demonstrated in the Latin American crises of the early 1980s, the Mexican crisis of 1994, and the Asian crises of 1997. During these times, direct investment inflows remained reasonably steady, while portfolio and other forms of investment dried up or turned negative on net balance
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