Foreign direct investment and economic development

Foreign direct investment and economic development

Forign direct investment (FDI)	A long term investmant by private multinational companies i oversea countries Greenfield investment- Build new or expand their existing companies Buy existing companies or merge Attracted to developing countries for a number of reasons: 1.countries may be rich in resources such as oil and minerals 2. some dcs are huge and growing markets 3. cost of labour may be low 4. government regulations are much less severe
Advantages associaiated with FDI	FDI helps to fill a savings gap Provide employment and some cases provide education and training Allow greater access to research and development Multiplier effect Tax revenue gained Increasing aggregate demand Improve thye infrastructure More choice and lower cost for consumers More effecient allocation of resources
Disadvantages	Only low skilled workers are used as managers come from abroad MNCs have to much power Transfer pricing Damaginf for the environment since they take advantage of regulations Resource stripping Use of capital intensive production but not use of many workers Owners of a firm are paid in stocks so money is usually not used within the country Transfer the profit back out the country They will ofton CSR in order promote a better image because of the negatives of Corporations- child labour, inability to make unions etc.