International Business Environment - Essay Example

Once a British colony, Kuwait's independence was granted in 1961. Throughout, its economy's survival is almost entirely bolstered by its oil production and sales. With the income, the government can have considerable support for its revenues, and attract in foreign workers (Factsheet, 2007). When Iraq under Saddam Hussein absorbed Kuwait in the 1990s, Iraq was overthrown from the country by a US-led military coalition, an event known as the 1991 Gulf war. With that aid, Kuwait became a close ally of the US (Factsheet, 2007).

As IMF and the World Bank encouraged most of the countries to do, Kuwait opened to foreign capital and vied for international investment starting from the 1990s. Mainly, Kuwait's strategy is to produce and sell as much oil as they can worldwide that it would become largely, the sole provider of the world's oil and US would certainly have it in its interests. (Pfeifer, 2002) Being the fourth largest producer now, this isn't a far-fetch goal. FDI had been advocated by many to be the boost developing economies need in order to progress sustainably.

Globalization through FDI is a mainstream event since the 90s. But policymakers in Kuwait as in the other developing countries are not aware that when their economic fundamentals do not match what is needed for this increase in FDI, however many the incentives they offer to attract FDI , they would just go to waste. But, internationalization through exports is Kuwait's overriding strategy; it is a country looking toward development by globalizing through FDI. (Nunnenkamp, 2001)Kuwait's Foreign Direct InvestmentA costly financial initiative like the later-to-be-discussed FDI Law is implemented because Kuwait anticipates the potential benefits to outweigh these costs.

But the view's shortcoming is that Kuwait, like the others, cannot be sure if FDI really could do much in gearing them towards development. After all, the impact of FDI relies on many