Role of FDI in the Short-Term and Long-Term Economic Growth of Kurdistan Region: Exxon Mobil and Chevron Case Study

By

TABLE OF CONTENTS

CHAPTER 1: INTRODUCTION1

Background of the study1

Economic Development Strategy of Kurdistan3

Kurdistan, a region of opportunity4

Problem statement6

Research Aims and Objectives6

Aims6

Research objectives7

Research questions7

Dissertation organization7

CHAPTER 2: LITERATURE REVIEW9

Introduction9

Overview of FDI12

Affect of FDI on economic growth15

Technology Spillover And Fdi16

Economic and Agricultural Policies and Regulations in Kurdistan18

FDI in Kurdistan19

REFERENCES21

CHAPTER 1: INTRODUCTION

Background of the study

Foreign direct investment (FDI) has a great impact on recipient economies by improving labor productivity, raising the level of human capital and income, and hence promoting the living standard and material well-being of the recipient economies in the long run. FDI first appeared in the world economy after the Second World War through reorganization and reconstruction of the whole world. In recent decades, FDI spread out worldwide quickly with the historical trend of globalization. Currently, FDI is considered the most important driving force of economic growth for many countries, particularly for developing countries (Young 1988 ). Nevertheless, some research concludes that the recipient economy's benefits from FDI vary greatly, both across and within countries.

This suggests that the recipient economy's characteristics are important factors in distribution of benefits of FDI. For example, perhaps the recipient economy must develop to a certain threshold, like a sufficient level of human capital, to have enough absorptive capacity to benefit from FDI. The likely impact of FDI has remained a controversial issue since enterprises became multinational. It is generally agreed that foreign direct investment has a role in the developmental process of a country but if its effect is positive or negative is highly controversial. The five main areas of research on the impact of foreign direct investment on economic development include growth, trade, employment and skill levels, technological diffusion and knowledge transfer, linkages and spillovers to domestic firms.

Foreign Direct Investment and Economic Growth

FDI is realized through direct or indirect participation of the foreign investors, usually the multinational corporations (MNCs). MNCs are usually firms that invest globally with the most advanced technology research and development (R&D). They have played a very important role in globalization. FDI by MNCs has been considered as a primary channel for developing countries to acquire advanced technologies (Roberte 1993 ). In addition to advanced technologies, FDI is also touted as a channel through which many other highly productive resources could be introduced into recipient economies via the cooperation between MNCs and recipient economies. Those resources include capital stock, managerial expertise, accounting and auditing standards, and knowledge of international markets. Foreign direct investment can impact growth directly and indirectly.

The impact of FDI can be seen to directly impact growth through capital accumulation, and the incorporation of new inputs and foreign technologies in the production function of the host country. Neoclassical and endogenous growth models have been used to empirically test these theoretical benefits of FDI. In the neoclassical growth models, FDI promotes economic. To facilitate this growth, the KRG passed a series of laws including the Law on Investment in the ...