Foreign Direct Investment Essay

Countries would participate in foreign direct investments because it helps in the economic development of the country where the investment is being made. They also engage in FDI to reduce production costs.

Many governments, especially in industrialized and developed nations, pay very close attention to foreign direct investment because the investment flows into and out of their economies can and does have a significant impact.

FDI allows the home country to invest into the host country to produce, advertise, and distribute products, in order to upsurge their market share and provides a long-term investment and enhancement. (Moosa, 2002)

It is real that the globalization rapidly expand through borders and industries, and it has happened because of forgin dircet investment. Foregin direct investment has advan and disadvantages. Foregin direct investment considered as one of the most important major in the business and economicenvironment and it is connected with business enterprise and benefits. This is very helpful because it helps to achieve your business goal in a short amount of time. Around the world, many countries open their borders to foreign investment. The one that makes the investment can be business corporation or individual, and group of companies. FDI leads to increase in job creation and employment.

Foreign direct investment (FDI) is an investment in a business by an investor from another country for which the foreign investor has control over the company purchased. The Organisation of Economic Cooperation and Development (OECD) defines control as owning 10% or more of the business. Businesses that make foreign direct investments are often called multinational corporations (MNCs) or multinational enterprises (MNEs). A MNE may make a direct investment by creating a new foreign enterprise, which is called a greenfield investment, or by the acquisition of a foreign firm, either called an acquisition or brownfield investment.

Foreign direct investment plays a critical role in financing the development of emerging economies. Foreign direct investment benefits countries through a transfer of resources in the form of capital, technology, management of resources, creation of work opportunities, and a positive impact on the country’s balance sheet, typically through an increase in export volumes. These benefits are essential for sustainable growth and development of a country, especially for developing countries. Despite the important role that foreign direct investment plays in helping to achieve the Sustainable Development Goals, many developing countries face challenges in accessing this source.

Foreign direct investment is becoming an increasingly important issue in today’s world, with the increasing globalization of capital markets. Foreign direct investment can occur when companies make investments abroad in multiple ways. Companies can invest in properties, plants and equipment abroad, invest in foreign businesses they already own, or acquire existing business assets of foreign companies. Defining the difference between direct investment and portfolio diversifying investments is an important distinction to make, and often depends on the definition of foreign direct investment that is being used, but generally at least 10% ownership of the equity in the foreign business is required in order for it to be

In recent times, there has been increased attention devoted to the role that foreign direct in-vestment (FDI) could play in ameliorating the general dearth of capital available for investment in most developing countries. Even though FDI is primarily meant to bridge the gap between the desired level of gross national investment and the prevailing amount of domestic savings and in-vestment, it also results in positive externalities that often serve as a catalyst in the overall eco-nomic growth and development of the country that receives it. The inflow of FDI is known to yield indirect benefits, such as enhanced employment opportunities, the improvement of the bal-ance of payments (BOP) account situation due to the increased availability of foreign exchange in an economy, and perhaps, most importantly, the prospect of the transfer of technology, manageri-al skills and other intangible knowledge to the host country which would allow domestic firms to improve their collective profitability and performance (Elijah, 2006).

Economists believe that Foreign Direct Investments is an essential part of economic evolution in every country. There are many academic papers that attempt to assess FDI aspects. Despite many researchers have tried to give an accurate explanation to FDI, there is no comprehensively approved theory. FDI motivations have been mainly researched by John Dunning, Stephen Hymer, Raymond Vernon, etc.

5) FDI also brings revenue to the government of the host country in terms of taxes.

In general the purpose of conducting this study is to make awareness that how Foreign Direct Investment can influence the economy of any country. This discussion can be held by investigating the following questions:

Foreign Direct Investment (FDI) refers to the investment made by an investor from a country to buy controlling shares of a business in another country. When an investor buys stocks and bonds in a country, it is referred to as portfolio investment. Unlike other passive investments, FDI is a direct form of investment in which the investor has to have the control of the ownership. FDI is seen

The other benefit of foreign investment is that it boosts competition in the host economy and, thus, prompts local businesses to seek greater efficiency in their operations. Besides this these multinational firms promote local businesses which supply inputs and or render services needed by them to support their operations. As a result of this, there will be a multiplier effect in terms of creation of employment opportunities.

The topic of my dissertation is about the determinants of foreign direct investment (FDI) in developing countries. With the trend of economic integration, FDI has been considered as an important part of boosting the economic development within any country around the world. Foreign direct investments differ entirely from indirect investments such as portfolio management.The direct way of investing in a foreign country can be conducted in a number of ways—either by establishing overseas controlled corporations, or associate company abroad, by obtaining shares of an multinational company, or though a joint venture.

Through FDI, the host countries will know efficient management technique. The best example is Basel II. Most of the banks are opting Basel II for making their financial system more safer.