Foreign direct investment | Edexcel Business

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Extract A Driving growth in the Association of Southeast Asian Nations (ASEAN) The story of economic growth within the ASEAN trading bloc is a remarkable one. Having survived the 1997 Asian financial crisis and the 2008 global economic collapse, ASEAN's gross domestic product (GDP) is now four times higher than it was in 1999. It increased from $577bn to $2.5 trillion in 2016, making it the sixth-largest economy in the world. ASEAN is expected to maintain its strong and steady economic progress with 2018 growth rates averaging 5.3\% according to forecasts by the Asian Development Bank (ADB). If ASEAN was considered as a single country, its approximate population would be 630 million, making it the third largest in the world behind India and China. It has a young population, 60\% are below the age of 30, and it has the third largest labour force in the world behind China and India. The World Bank currently estimates ASEAN's labour force to be 350.5 million. The International Labour Organisation (ILO) predicts that ASEAN will add another 59 million people to its workforce by 2030 - making it the second largest growing labour force in the world behind India. This means ASEAN would account for 10\% of the global labour force by 2030.

Figure for Question 4.3.1.2c - Foreign direct investment question 1 — Edexcel A-Level Business A2

A growing workforce which is advanced and professional will also be a pull factor for

The European Union (EU), China, South Korea and Japan are the major investors. FDI in CLMV (Cambodia, Laos, Myanmar and Vietnam) rose by 8\% in 2018, driven mainly by manufacturing and infrastructure industries.

Extract B ASEAN's newbies come into their own When the membership of ASEAN was enlarged between 1995 and 1999, the two most frequently asked questions were: could Cambodia, Laos, Myanmar and Vietnam (CLMV) integrate with the older ASEAN members? Would the 10-member ASEAN bloc survive with such a huge development gap, not to mention vast differences in political cultures? Two decades later, the answer is quite clear, the newer member states are moving toward full integration in the economic, political, security, and social cultures of ASEAN. For example, Vietnam has proven beyond any doubt that since joining ASEAN in 1995, it has adapted well to the bloc's structure and processes. In economic terms, Vietnam has become one of the most open economies in ASEAN. Since undertaking economic reforms in 1984, Vietnam has signed 17 free-trade agreements, even though it is still not classified as a market economy. With these global free-trade agreements, Vietnam is aiming high and wants to be a middle-income country within the next two decades.

Extract C

$Vietnam's GDP growth rate \% per year$

Vietnam's GDP growth rate \% per year

*2018 and 2019 are forecasts. Source: Asian Development Bank. Asian Development Outlook (ADO) 2018

Discuss the importance of foreign direct investment (FDI) to the growth of
businesses in ASEAN.

Indicative content guidance
Answers must be credited by using the level descriptors (below) in line with the
general marking guidance. The indicative content below exemplifies some of
the points that candidates may make but this does not imply that any of these
must be included. Other relevant points must also be credited.
Quantitative skills assessed
QS9: interpret, apply and analyse information in written, graphical and
numerical forms.
Knowledge, Application, Analysis, Evaluation - indicative content
- FDI is the flow of money into one country from businesses in another
country
- FDI has grown rapidly, particularly since 2000 when it was $23bn and
had more than quadrupled to $101bn by 2016
- In that time GDP had also more than quadrupled since 1999, from
$577bn in 1999 to $2.5tn in 2016
- Much FDI has gone into manufacturing and infrastructure which will
help the development of businesses in ASEAN
- Investment in new production plants creates jobs and incomes for
local inhabitants which increases the GDP of Vietnam
- Local businesses are involved in the construction and supply for the
new plants, creating further employment and income
- Employment rises with increased incomes spent on local businesses,
again driving growth
- However, while FDI is important it is not the only factor that is
important in the growth of businesses within ASEAN
- significantegyietnames also have a young and expanding labour force
and many natural resources making growth more likely

Level

Mark

Descriptor

0

No rewardable material.

Level 1

1-2

Isolated elements of knowledge and understanding - recall based.
Weak or no relevant application to business examples.
Generic assertions may be presented.

Level 2

3-5

Accurate knowledge and understanding.
Applied accurately to the business and its context.
Chains of reasoning are presented, showing cause(s) and/or effect(s)
but may be assertions or incomplete.
An attempt at an assessment is presented that is unbalanced and
unlikely to show the significance of competing arguments.

Level 3

6-8

Accurate and thorough knowledge and understanding, supported
throughout by relevant and effective use of the business
behaviour/context.
Logical chains of reasoning, showing cause(s) and/or effect(s).
Assessment is balanced, well contextualised, using quantitative and/or
qualitative information, and shows an awareness of competing
arguments/factors.

Question
Number

Indicative content

4.3.1.2c - Foreign direct investment question 1