Ohmae thesis

The free movement of capital also encompasses investment by foreign firms, so called foreign direct investment (FDI). Foreign direct investment has played an important role in the Czech economy since the fall of Communism (Myant, 2007, p. 440; Marek & Baun, 2010a, pp. 76- 78). The collapse of communism also meant that that the Czech economy had to be transformed from a centrally planned state- owned economy to market orientated capitalist economy (Marek & Baun, 2010a, p. 72). This meant the Czech Republic was forced to undergo huge structural changes such as the freeing of price controls, privatization of ownership and crucially the liberalization of foreign trade and investment (Marek & Baun, 2010a, p. 72). This liberalisation along with Czech accession to the EU led to large amounts of FDI into the Czech Republic. By the end of 2007 cumulative FDI into the Czech Republic reached over €76 billion of which 90% came from fellow EU members (Marek & Baun, 2010a, p. 77). However Czech firms were initially careful about accepting foreign investment for fear of job losses (Myant, 2007, p. 440). Often firms sought assurances from their future parent firms over matters such as continued employment or investment (Myant, 2007, p. 440). A good example of this is the sale of the Škoda car manufacturer to Volkswagen (VW) in 1991 which was sold with assurances that VW would invest substantially in the Czech wing of the firm to double production. Volkswagen agreed and subsequently invested around € billion making Škoda one of the largest employers in the Czech Republic with around 27,000 workers and, as promised, production also rose from 184,000 units in 1989 to almost 500,000 by 2005 (Myant, 2007, p. 440; Marek & Baun, 2010a, p. 77). This would suggest that the Czech Republic has embraced the idea of the freedom of movement of capital and the subsequent foreign direct investment. However due to the fact that this investment is largely from fellow EU members this would suggest that the economy of the Czech Republic can more accurately be described as regionalised rather than hyper globalised.

Ohmae thesis

ohmae thesis


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