Abstract
M.Comm.
This mini dissertation is a literature review that deals with trade liberalisation in the
form of Regional Trade Agreements. It focuses on the importance of FDI for
economic growth of developing countries. This study investigates ‘new regionalism’
critically. New regionalism suggests that economic growth may be possible if
developing countries form trading blocs, which partner with a larger economy and
engage in policy reforms aimed at attracting FDI. The study concludes that a trading
bloc may possibly attract FDI and create export and growth opportunities. However,
the developing countries should be able to manage all aspects associated with REI.
These aspects include the negative effects of trade diversion, the impact of
adjustment costs, and the administrative requirements of managing RoO in the
landscape of highly proliferated RTAs. In addition, FDI will only result in the required
growth if the developing economy is able to absorb and assimilate the new
technologies and production methods FDI is expected to bring to its shores.
Moreover, the FDI should be targeted so as to develop industries of comparative
advantage. In order to absorb these benefits a high level of skilled labour is required
as well as support structures to assist with training and development of the labour
force. In addition, new rules under the WTO is restrictive in the latitude it allows
developing countries to assimilate the production methods and technologies of
MNCs. The research concludes that careful planning and policy development is
required prior to REI if it is to have a hope of succeeding in its goals.