Foreign Direct Investment

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Frontier markets represent "the next wave" of investment destinations. These markets are generally either smaller than traditional emerging markets, or are found in countries that place restrictions on the ability of foreigners to invest. The majority of African countries falls under frontier markets which include Nigeria, Botswana, Morocco, Tunisia and Ghana. Although frontier markets can be exceptionally risky and often suffer from low liquidity, they also offer the potential for above-average returns over time.

Recommendations

Investment options

If this arrangement is acceptable, I would like to believe that investing in the developed markets is the best possible option as more global executives are more optimistic about the economic outlook of the developed markets with U.S. topping the list (see appendix 2). However, according to the sentiments made by the executives on the U.S. coming elections if Americans choose to elect a populist (far-right) in November elections, the FDI flows will go down insignificantly by a margin of about 2.8%. I would say the election will not change the pre-conditions of a safe investment destination. This can be supported by what had just happened in Europe where the people of United Kingdom voted to leave E.U. (BREXIT), the statistics show that, FDI inflows from the Chinese investors actually increased and are expected to invest in properties up to $13.2 billion by 2020. Europe attracts more than a quarter of the world’s total FDI inflows, due to its highly qualified labour force, sophisticated, well-heeled consumers, and world-class infrastructure.

Regarding investing in the emerging markets, the argument is that, there is a slowdown in the GDP growth rate (in particular China) from 10.3% to a forecasted average of 6.1% per year. This slowdown is as a result of the transitioning from an export based to a consumption led economy. Despite this growing pessimism (see appendix 2) about the Chinese economic outlook, some investors will continue investing because of the continuous growth of the middle class. In terms of loosening the investments obstacles, it remains to be seen on how Beijing will implement privatisation of some of the key industries that will open opportunities for foreign investors.

Signed: Accountant

Appendix 1

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Appendix 2

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References

AT Kearney, 2014. 2014 A.T kearney FDI Confidence Index: U.S. Increases its lead; on Overidingly positive outlook Develops for Global Economy. [Online]

Available at: https://www.atkearney.com/news-media/news-releases/news-release/-/asset_publisher/00OIL7Jc67KL/content/2014-a-t-kearney-fdi-confidence-index-u-s-increases-its-lead-an-overridingly-positive-outlook-develops-for-global-economy-fdi-news-release/10192

[Accessed 01 October 2016].

Avis, J., 2009. Solutions to revisions questions . Elsevier Ltd, ed. Performance Management. Oxford: CIMA publications, pp. 539-546.

Laudicina, P. & Peterson, E., 2016. The 2016 A.T.Kearney. Foreign Direct investment Confidence Index, II(15), pp. 1-32.

Matemande, W., 2016. Week 5 Lecture; Foreign Direct Investments versus Collaborative Joint ventures; TSIME site Available at http://tsime.uz.ac.zw. (Accessed 30th September 2016)