Arkolon wrote:Belmaria wrote:I would consider it a net increase, as they are spending money within the national economy, and thus planting some capital of their own within the nation.
I'd have thought that, but consider that the capital account (by definition the reverse of the current account aka trade balance) being positive represents a shrinking economy importing more than it exports, and the wikipedia page does define the capital account as equal to the Change in Foreign Ownership of Domestic Assets minus the Change in Domestic Ownership of Foreign Assets. So exporting more than you're importing represents more domestic claims on foreign assets and the inverse means foreigners are acquiring claims on domestic assets. I can't see this meaning more net investment, which is reinforced by page from the World Bank which asserts that statement.
The problem with this sentiment is that the world has finite monetary resources, and it's not feasible for a small nation to expect to have trade or payment balance; particularly if said small nation has few natural resources or skilled laborers. Third world nations must, therefore, encourage foreign investment as a means of attracting capital to their economies. Regardless of the robust nature of economic superpowers like Europe, Russia, China, the USA, and others, money is money, and if a small nation can acquire it from a foreign source (assuming it stays within the economy) such procurement will result in a net gain economically.