Compare the importance of two different transfers of capital between the global core and peripheries
Transfers of capital may vary depends on whom/where you transfer to and the purpose of transferring. Including loans, debt repayment, development aid, remittances, foreign direct investment and repatriation of profits. The focus of 2 types of capital transfer will be the remittances and foreign direct investment. Trans National Corporations (TNCs) are the main source for Foreign Direct Investment (FDI). FDI is an investment made by a company or an individual (usually company) to business interests in another country, in forms such as establishing business operations or acquiring business properties in the other country. Including ownership or even control interest in a foreign company. On the other hand remittances are transfer of money by a foreign worker to his/her family living in the poor conditions. The most commonly seen are workers who works in MEDCs, or in the urban area of the country transfer money back to home, to support and helping their family to improve the quality of life. This essay will compare remittances and FDI, how these 2 different types works between core and periphery countries, and the role of semi-periphery countries. Ever since the rules and regulations of goods and investments have been relaxed in past decades, the growth of FDI has expanded, the sources and destinations of investments became more and more diverse. Flows of FDI unlike old days, from core to periphery. Recently the investment flow from newly industrialised countries (NICs) such as South Korea, Taiwan, China, India and Brazil have increased remarkably. The investment flow network is more complicated today comparing to 20 years ago. According to the World Investment Report from 2009, there are 82,000 TNCs worldwide, with 810,000 foreign affiliate. The combined value of all TNCs including foreign assets, sales and employment, accounted for approximately 4% of global GDP. FDI often comes from large firm located/ based in MEDCs or even NICs (especially 1st generation NICs), FDI may take a big part of economy depending on the regions and countries. From the figure below, it shows that FDI both outflow and inflow are concentrated in certain countries. This chart used the data collected in 2007 and 2008. Back in 2007 and 2008, China was the dominant country for productions goods such as branded clothing. This chart clearly shows that China has high FDI inflows compares to outflow. Looking at the outflow chart, it clearly shows that MEDCs are dominant in outflows of FDI. In both outflow and inflow, United States ranked first, with 316 inflow and 312 outflows in year 2008. MEDCs are more dominant in the inflow, but outflow on the other hand more LEDCs are make it up into the list. However country such as United States and France still dominates in the outflow, even though they are MEDCs, and dominant in the FDI inflow.
Remittances are less concentrated in certain countries compare to FDI, which tends to focus on particular countries including inflow to China, USA, and outflow from USA, France Japan. In some countries remittances are not having much of noticeable impacts in countries' economy. 1/3 of global remittances originate in the United States. While most of the rest are sent from Europe and the Middle East. Increasingly significant volume of remittance money circulates within the developing world from urban to rural areas. Latin America and the Caribbean countries are receiving the highest level of remittances per capita. The money sent to the region has increased over the past 20 years. In Latin America and the Caribbean, remittances becomes over $66.5 billion in 2007 in total. This represents more than the sum of foreign direct investment and the development aid. In seven of Latin American and Caribbean countries remittances take place for more than 10% of countries' GDP. In countries such as Zimbabwe, government tried to persuade its people to work abroad. Channel their earnings, the remittances through formal transfer agencies. For the majority of Somalis, remittances sent back by who works abroad has been the most important source of income, ever since the country’s economy collapsed in the 1990s. Some research has shown that higher remittances flow are lower poverty, better health and higher levels of education in the LEDCs. However, it causes that national economies that rely on remittances become vulnerable, countries which dependent on remittances shows that the working-age adult population shrink. Family members left behind may stop working and develop a culture of dependency on the remittances sent from relatives.
Comparing remittances and FDI, both has it's own benefits to core and periphery, while it still brings some disadvantage in both core and periphery countries as well. Remittances will benefits the core countries, due to the working age workers migrating to core countries and to find the higher wage job send money back home, so in core countries jobs that are not popular among local people, there would be people who actually willing to those work. While it may increase the core countries' unemployment rate. In periphery countries, the loss of working age population cause to the high dependency ratio. Which leads to the dependency towards remittances. FDI on the other hand, it will benefits the periphery countries, because it will increase countries' job opportunity, but decreasing job opportunities in countries where previously had the company provides huge population the job opportunity. Semi-periphery on the other hand, it plays both rules in terms of both FDI and remittances, NICs based in semi-periphery countries may directly invests foreign countries. While it may be the country being invested by other NICs. Also it can be countries sending worker to foreign countries to send remittances back home, or a country which workers from LEDCs working for sending remittances back home. For example Taiwan, there's Vietnamese and Pilipino works in Taiwan sending remittances home. While there are Taiwanese who works in core countries and sending remittances home. Taiwan also has NICs investing foreign countries such as countries in South East Asia, while Taiwan is being invested by NICs based in core countries.
Finally, remittances and FDI both improves country's economy in certain ways, but both of them has consequences to certain degree. However, in the general sense both remittance and FDI are beneficial to country's economy, especially if that country haven't been improving economically for a long period of time, and not an economically dominant country worldwide.