Foreign Direct Investment Research Paper

ADVANTAGES OF FOREIGN DIRECT INVESTMENTS

Economic development: Foreign Direct Investment helps in the economic development of the host country where the investment is being made. FDI is especially applicable for the economically developing countries. During the decade of the 90s FDI was one of the major external sources of financing for most of the countries that were growing from an economic perspective. It has also been seen that foreign direct investment has helped several countries when they have faced economic hardships which could be clearly seen in some countries of the East Asian region. During the financial crisis of 1997-98 it was observed that the amount of foreign direct investment made in these countries was pretty steady. But

It has also observed that as a result of receiving foreign direct investment from other countries, it has been made possible for the recipient countries to keep their interest rates at a lower level.

Income generation: Foreign direct investment assists in increasing the income that is generated through revenues realized through taxation. FDI also plays a crucial role in increasing the productivity of the host countries. In case of countries that make foreign direct investment in other countries this process has positive impact as well. The corporates of these countries get an opportunity to explore newer markets and thereby generate more income and

The biggest beneficiaries of these facilities are the small and medium-sized business enterprises. Foreign direct investment leads to increase in profits within different industries as well as tax cuts and expanded marketability for singularly differing industries. Many times procurement of material, buildings, and labour can be obtained at a fraction of the cost in host countries than would be the case within the company 's home country. But it is always good to keep in mind the host countries economy and market. Corporates are often forced to abide by local regulations rather than the regulations of their home country. On the other hand, the host country benefits due to the increase in jobs, increase in the productivity and increase in the capital base due to investment made by the foreign country. Often times dying economies can be revived in the process of becoming a host for certain industries or markets in which that industry or market had not previously been. This is especially the case with third world countries that are trying to catch up to industrial nations or who need a boost due to changes in regional climates or in the advent of recovery from the aftermath of civil or world