Foreign Finance, Investment, Aid, and Conflict: Controversies and Opportunities

These flashcards cover key vocabulary terms related to foreign finance, investment, and aid in economic development.

Foreign Direct Investment (FDI)

Investment made by a company or individual in one country in business interests in another country, in the form of establishing business operations or acquiring business assets.

Multinational Corporation (MNC)

A corporation that has its facilities and other assets in at least one country other than its home country.

Remittances

Money sent back home by international migrants, important for reducing poverty in their home countries.

Foreign Aid

The international transfer of public funds in the form of loans or grants from one government to another or from international agencies.

Official Development Assistance (ODA)

Net disbursements of loans or grants made on concessional terms by official agencies from developed countries to developing countries.

Concessional Terms

Financial terms that are softer than commercial terms, typically characterized by lower interest rates and longer repayment periods.

Absorptive Capacity

The ability of a recipient country to effectively utilize foreign aid funds in a productive manner.

Technical Assistance

Support provided to a developing country aimed at enhancing skills and capabilities necessary for sustainable development.

Crowding Out Effect

When foreign investment leads to reduced local investment, often due to competition for resources.

Two-Gap Model

A theory suggesting that developing countries face a shortage of domestic savings and foreign exchange to finance their growth and imports.

Nongovernmental Organizations (NGOs)

Non-profit groups that provide aid and development assistance independently of government intervention.

Transfer Pricing

The pricing of goods, services, and intangibles between related business entities, often used by MNCs to minimize tax liabilities.

Portfolio Investment

Investment in financial assets such as stocks and bonds, which can offer higher returns with varying risks.

Brain Drain

The emigration of highly trained or educated individuals from one country to another, often resulting in a loss of skilled workforce.

Public Revenue

The income generated by the government, primarily through taxation, including taxes collected from MNCs.

Economic Motivations for Aid

Reasons for providing foreign aid that include promoting growth, sustainability, and political alliances.

Ideological Perspectives

Views informed by beliefs or ideologies that affect opinions on foreign investment and its impact on development.

Management Gap

The lack of necessary management skills and expertise in developing countries, often filled by MNCs.

Savings Gap

The difference between the amount of savings that a country needs to support its investment needs versus what it can save domestically.

Trade Deficit

An economic situation occurring when a country's imports exceed its exports, leading to a negative balance of trade.