Trade Openness Analysis

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2.3 TRADE OPENNESS FDI, GDP AND OPENNESS OF ECONOMY Based on the study by Kandiero and Chitiga, (2006), the FDI and GDP respond well to the increase of openness in the economy especially in the service sectors. The reduction of tariff barrier will surely help to promote FDI to the countries. Greater openness is one way for the African to catch up with other region in developing FDI. In a more micro view in the case of African countries, the service sector opening influences the FDI to GDP ratio more than in agriculture and manufacturing sector. They use the export and import sum of GDP to represent the openness as they believed that a more open economy are represented by the volume traded and will attract more FDI. INTERCORRELATION BETWEEN…show more content…
The importance of FDI and trade openness was the notorious features trend toward globalization in recent years and has emerged as one of the talking points by the economist when explaining the growth of developing countries. As this two component is assumed to have a parallel relation, the positive trade openness contributes to nation growth by improving productivity and export capability. Trade openness also provides a greater efficiency, It is found that the countries with more openness relatively outperformed their economy than less opened countries because they indirectly promoting the FDI to their countries thus enjoying the benefits of…show more content…
Some study that they found shows a negative impact of trade openness on market-seeking FDI inflows while the others, found that countries that more opted for international trade receive more FDI. They used total trade as a share of GDP to investigate and measure the trade openness. Thus, their finding is the trade openness positively affects FDI inflows. Countries that export more will attract more foreign inventor as there are more market opportunities for the countries and investor can do more investment to get more handsome returns. TRADE OPENNESS AND EMERGING ASIAN FDI Based on the finding of study on “Foreign Direct Investment in Emerging Asian Countries”, the FDI inflows to Indonesia, Philippines, Singapore and Thailand react positively to the degrees of openness. As country’s degree openness improves, it would attract more FDI inflows where a country which has more open market policy would stimulate FDI as there is more opportunities for larger economies of scale and positive spill-over effects. OPENNESS OF DOMESTIC ECONOMY TOWARDS

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