Foreign Direct Investment In International Economy

Foreign investments have increased more than ten times in the global economy in the last 20 years. This kind of investments bring private overseas funds into a country for investments in manufacturing or services. For example, in Philippines and Thailand, many multinational corporations (MNCs) like Ford, General Motors, BMW, Honda established their automobile manufacturing units, thus providing employment opportunities to citizens and helping for overall economic development of the country.

Foreign direct investments (FDIs) can also bring an immense growth in a national economy. Foreign investments involve capital flows from one country to another country. Since the modern trend is towards globalization and international trade, multinational

Some economists argue that MNC has become free from its home economy. Nowadays, it has become a powerful independent force, which determines international economic and political affairs. Others believe that MNC remains a creature of its home economy.

Power of MNCs

MNCs expand in overseas markets primarily through foreign direct investments (FDIs). MNCs invest with the purpose of achieving partial or complete control over production, marketing and other facilities in the other economy. MNCs mainly invest in manufacturing, services and commodities sectors of an economy. MNCs use FDIs to purchase existing businesses or building new facilities. Overseas expansions are generally done by takeovers, mergers or corporate alliances with domestic companies in other economies.

MNCs exert an immense power in globalized world economy. Many corporations are richer and more powerful than the states. MNCs have been growing very rapidly in the contemporary market economy through mergers and acquisitions. For example, the largest MNCs now enjoy huge annual profits, which exceed the combined GDP of many low and medium income countries. They dominate the global economy and use their influence in policymaking. 5.1.3 International Regime for FDI and

For example, MNC provides as a major source of capital and technology for economic development within a country. Continuing restructuring of manufacturing and services is very important in the nature of world economy. MNCs play a significant role in transfer of technology between the countries. There is an increased importance of regionalization in world economy. MNCs of major economic powers continue to invest in one another’s economies as a strategy. They are concentrating more on neighbouring countries for investments. The creation of regional production and sourcing networks has become a remarkable trend in