The Impact of Cartel Practices and Capital Movements Regulation on Foreign Direct Investment in the Years 1990-2002
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Publication date: 2004-01-25
GNPJE 2004;189(1-2):71-86
The aim of this article is to determine major factors of the level of foreign direct investment (FDI). A macroeconomic situation of countries has been presented along with legal regulations limiting the access to local markets. In the years 1990-2002, the number of agreements concluded between FDI exporters and importers was 2,031. Attention has been drawn to correlations between the number of concluded agreements and the level of investment. The analysis has covered the countries of South-East Asia, South America and Central and Eastern Europe. The study involves an analysis of the rank correlation measure, allowing to determine the relationship between the examined features. A close correlation between the number of concluded agreements (regulating capital movement) and FDI level has been determined for the countries of South-East Asia. The rank correlation measure amounting to 0.975 proves that the tested hypotheses are correct. A major role in this respect is played by bilateral agreements. They allow to reduce differences, to meet foreign investors’ expectations and, by the same token, to increase capital inflow. A major problem is posed by activities of international cartels. Price increase and a fall in the level and growth rate of global direct investment are direct consequences of their presence. Concern is expressed over long duration of cartel agreements and over low penalties imposed on their participants. Cartel agreements are concluded in both economically developed and developing countries. The article presents shares of typical goods covered by cartel agreements in world trade. A cartel agreement slows down the growth rate of imports to OECD markets, accompanied by a rise in exports to developing countries.
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