Question

Which of the following is true of economies in the base of the global economic pyramid? a. They are composed of developed economies. b. They are composed of people from North America, Western Europe, and Japan. c. They are largely ignored by MNEs. d. They attract the largest FDI from MNEs.

Answer 1

Answer:

The answer is: D) They attract the largest FDI from MNEs. If you consider FDI´s share of the country´s GDP

Explanation:

The countries that are located in the base of the global economic pyramid are all underdeveloped and poor countries, so no North America, Europe, Japan, China, or Australia. If you consider the total nominal amount of Foreign Direct Investment (FDI) by Multinational Enterprises (MNEs) in the world, the countries that receive the most of them usually have large economies or high GDP per capita (only Brazil is an exception) like the US, China, Belgium, Canada, France, Russia, Singapore, etc.

But if you consider FDI as a percentage of a country´s GDP the list of receiving countries varies a lot. The following is the list of the 10 countries with the greatest share of FDI to GDP in 2011 (UN 2011 report)

1. Liberia
2. Mongolia
3. Hong Kong SAR (China)
4. Sierra Leone
5. Luxembourg
6. Singapore
7. Congo republic
8. Belgium
9. Chad
10. Guinea

In this list you can find 6 countries that are extremely poor but very rich in natural resources (in this case minerals). So if consider the relative size of FDI in those economies, then it´s huge. Most FDI done on poor countries is directed to mining or oil corporations.