Question

What are the common characteristics of international investment and domestic investment in Australia? Compare if investment within Australia or investment international is better?

Answer 1

1)Benefits traditionally attributed to FDI include job creation, transfer of technology and know-how (including modern managerial and business practices), access to international markets, and access to international financing. Granted, some of these benefits also occur thanks to domestic investment.

2) FDI is not a panacea. Some FDI projects fail; others generate negative externalities, such as corruption, environmental degradation or fraud. But domestic firms can also fail, and they are also perfectly capable of engaging in fraud or bribery or of damaging the environment. The conclusion we draw from experience and economic literature is that FDI – like domestic investment – is not good or bad in itself. It can be both.

3) Through a long-term vision and the disciplined implementation of conducive and targeted policies, Australia was able to harness the power of FDI, both inward and outward. The country followed that strategy both to strengthen the competitiveness of its economy and domestic firms, and to generate a massive volume of jobs and exports.

4) Typically, foreign and domestic firms share suppliers of intermediate inputs, locally. But since foreign firms are known to be “pickier,” their presence can create incentives for local suppliers to deliver higher quality goods. Thus, domestic firms who share suppliers with foreign firms gain access to newer, better local inputs, allowing them to expand their product scope and productivity.

The second part is answered as below:

Foreign investment is integral to the Australian economy. As an open, well-regulated economy with a highly skilled workforce, Australia enjoys an international reputation for innovation. To make the most of these advantages, Australia uses international capital to supplement domestic savings.

Foreign investment helps Australia reach its economic potential by providing capital to finance new industries and enhance existing industries, boosting infrastructure and productivity and creating employment opportunities in the process.

The higher growth supported by foreign investment pays dividends for all Australians by increasing tax revenues to the federal and state governments, and increasing the funds available to spend on hospitals, schools, roads and other essential services.

Foreign investment has other benefits beyond injecting new capital. By bringing in new businesses with connections in different markets, it opens up additional export opportunities, boosting our overall export performance. It also encourages competition and increased innovation by bringing new technologies and services to the Australian market.