Question

• Do you think it’s appropriate for countries within the EU to prohibit foreign direct investment within EU companies?

What is the of the impact of this EU policy to the stakeholders of these companies. ( employees, shareholders, EU Citizens)

Answer 1

Introduction

The European Union was found, with the simple reason of bringing economic and social wellbeing across the various countries which are a part of this association through mediation, dialogue and relevant policies which look at development of each section of the economy.

This translated, into overall policies which resulted in increase in capital resources for these countries, and looked to remove trade barriers and ensure that trade took place at favorable terms within the community.

However, still rules exist to protect regional economies of direct foreign investments which also translate into members within the European Union Also. These in the recent times, when other global organizations such as the World Trade Organization are looking forward to reducing foreign direct investment norms can be considered as a hurdle to overall development of the European Union Respectively.

Case Specifics:-

Question:-Do you think it’s appropriate for countries within the EU to prohibit foreign direct investment within EU companies?

In the modern times, when most countries are aiming for better Foreign Direct Investment rules and regulations, restricting any form of trade is highly not recommended.

The problems associated with such trade are, that it restricts the overall economic activity within the participating countries and the effects of not engaging in free trade are that economies progress at a much lower rates than others.

This has been largely seen in previously closed economies which have discouraged Foreign Direct Investments. FDI brings with it huge sums of capital and technology which are necessary for growth and development across various regions respectively.

Further such companies which are restricted from Foreign Direct Investment may feel a degree of protection but however, in reality they fail to meet international standards eventually running dry on profits.

What is the of the impact of this EU policy to the stakeholders of these companies. (Employees, shareholders, EU Citizens)

The impact of this policy on the various stake holders is as described.

Employees:-

The only positive to such exercise is that employees are not subjected to change which they may like but however is not important for their overall growth and development.

It is a known fact, that foreign direct investments causes employees to be more technologically updated and enhances their skills. Companies that invest via the foreign direct investment route, not only bring with them capital, but also aim to improve profits by increasing the technological and functional knowledge of the employees.

Thus, as a result of non-implementation of Foreign Direct Investment in the European Union, employees receive significantly lesser training, technological knowledge and find it tougher to compete with international counterparts. Over the years they find it difficult to find employment since companies prefer hiring fresh recruits and training them on new technologies whenever implemented.

Shareholders:-

Shareholders of companies that are in areas in which FDI is restricted may feel secure about their direct investments not being impacted by foreign takeovers, however in the long run the reduced economic activity and slowness in adoption to newer technology and higher capital, transgresses into them having invested in a company which does lesser progress than others which fully allow FDI to take place.

This in the long run means, that shareholders generate lesser money on their overall investments and is harmful for them also.

EU Citizens:-

The impact of not allowing Foreign Direct Investment in the companies mean that the normal citizens of the countries have significantly lesser availability of products and services which otherwise would have been the case had FDI been allowed.

This happens because companies independently find it tough to innovate and often fail to have enough capital requirements for research and development on their own.

As a result the citizens are negatively impacted from trade restrictions, since their overall demand pattern becomes limited and also job opportunities for them remain stagnant.

Please feel free to ask your doubts in the comments section if any.