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FOREIGN DIRECT INVESTMENT (FDI)

Nowadays it’s very common to invest the finance across the border. This technique is known as Foreign Direct Investment (FDI). This practice has been proved to be very elastic and resilient when there were financial crises all over the world. We can take an example, in East Asian countries; such investment of finance was amazingly and extraordinarily stable during the international Financial Crises of 1997-98. This practice could lead many underdeveloped and developing countries to support FDI. Besides earning profit and money, the purpose of the investment is also the betterment of the people. The investment should be made in the areas where it is needed the most. The economists encourage the capital to flow across the national border because it helps the capital to seek out the great rate of return. Unrestricted capital brings much more advantages, as indicated by Feldstein (2000). Initial international capital flows reduce and minimize the risk encountered by the owners of this capital by allowing the capital to be diversified it among the different countries. Besides this advantage, the diversification of capital markets can lead to the spread of good practice in the system of rules by which a company is controlled and directed. It is also helpful in legal traditions. The final and impressive importance of foreign direct investment is that the mobility of capital across the national borders limits the government’s ability to follow bad and wrong policies.

FDI also allows the sharing of technologies among the different countries. The technology and strategies that have been applied in some certain country can be beneficial for some other country too. The investors can learn a lot of things while doing investments across the borders. Besides this, FDI also provides employment opportunities to the underdeveloped countries, which ultimately reduces the ratio and percentage of crimes. It provides huge and massive labor opportunities to the poor people in the country. It leads to human capital in the host country. FDI can also promote the competition among the countries. Now the competition is among the countries instead of cities. So greater the competition, greater will be the return.

Now let’s move towards another side of this idea. The revenue generated and earned by FDI contributes to tax authorities in the host country, because they have been carrying out their business activities in that country.

A number of people have a wrong perception that strong economic growth can not be brought in the underdeveloped countries. Instead, the foreign direct investment has become an engine for the global economy. It’s not only beneficial for the host countries but also on the global level. Approximately 50% of United States’ exports are now being made to the emerging and developing markets. The foreign direct investment is carried out with certain and sound strategies that it might bring betterment to the hosting country too. The global market should help all the segments of the society. This type of investment has made the world a global village. Now the countries interact with each other for the purpose of investment. And it’s a two-way beneficial strategy. About ninety percent of the jobs have been provided by the private organizations in the developing countries.

 

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About Maryum Afzal

Maryum Afzal

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