Benefits Of FDI FDI is the abbreviated form of Foreign direct investment and refers to the long term involvement

of one country with another country. This usually involves participation in joint-venture, management, transfer of expertise and technology etc. Foreign Direct Investment is a part of most economies of the world today and plays a key role in the development of a countrys economy. FDI is now a fundamental part of the global financial system. There are various national policies and plans designed for the having an effective government control on FDI. There are many benefits of FDI both for the investors and the country where investment is being done. Some of these advantages include: 1. Helps in economic The inflow of foreign direct investment helps in the economic growth of a country. growth.

2. Aids to improve trade. Foreign Direct Investments opens up a wide spectrum of opportunities in the trading of goods and services. This is true both for export and import production. The increased amount of FDI inflow leads to the manufacture of superior quality products that can be sold at higher prices and are suitable for being exported to other countries. 3. Brings employment opportunities. FDI inflow results in an increase in the number of employment opportunities for people living in that country. New industrial units are set up affording employment to people from the top level to the working groups like factory workers. 4. Aids in transfer of technology and knowledge. The inflow of FDI aids in the transfer of technology and knowledge from one country to another. For instance, the people of Asian countries like India had vast knowledge related to IT sector which was later used by many other non Asian countries of the world. Thus, FDI helps in the transfer of knowledge across the world. 5. Benefits to the government. Foreign direct investment helps in increasing the sources of government income. With the increased flow of FDI the income generated through taxation increases thus, bringing higher revenues to the government. 6. Improves productivity. FDI plays an important role in enhancing the overall productivity in the host countries. 7. Benefits for the investors. FDI is also quite beneficial for countries that make investments in other countries. Their companies get opportunities for exploring new global markets, thereby generating higher incomes and profits.

8. Benefits to businesses. Business entities get easy loans at low rates of interest. These facilities are extremely beneficial for small and medium-sized businesses that otherwise face many problems in getting loans. Although the local conditions of a country, such as the development of financial markets and the educational level of people living there can an affect the overall impact of FDI on financial and economic growth., on the whole, the FDI has a positive impact for both the investors and places where investment is being done. FDI should be promoted in all parts of the world.

Disadvantages of Foreign Direct Investment

The disadvantages of foreign direct investment occur mostly in case of matters related to operation, distribution of the profits made on the investment and the personnel. One of the most indirect disadvantages of foreign direct investment is that the economically backward section of the host country is always inconvenienced when the stream of foreign direct investment is negatively affected.

The situations in countries like Ireland, Singapore, Chile and China corroborate such an opinion. It is normally the responsibility of the host country to limit the extent of impact that may be made by the foreign direct investment. They should be making sure that the entities that are making the foreign direct investment in their country adhere to the environmental, governance and social regulations that have been laid down in the country.

The various disadvantages of foreign direct investment are understood where the host country has some sort of national secret something that is not meant to be disclosed to the rest of the world. It has been observed that the defense of a country has faced risks as a result of the foreign direct investment in the country.

At times it has been observed that certain foreign policies are adopted that are not appreciated by the workers of the recipient country. Foreign direct investment, at times, is also disadvantageous for the ones who are making the investment themselves.

Foreign direct investment may entail high travel and communications expenses. The differences of language and culture that exist between the country of the investor and the host country could also pose problems in case of foreign direct investment.

Yet another major disadvantage of foreign direct investment is that there is a chance that a company may lose out on its ownership to an overseas company. This has often caused many companies to approach foreign direct investment with a certain amount of caution.

At times it has been observed that there is considerable instability in a particular geographical region. This causes a lot of inconvenience to the investor.

The size of the market, as well as, the condition of the host country could be important factors in the case of the foreign direct investment. In case the host country is not well connected with their more advanced neighbors, it poses a lot of challenge for the investors.

At times it has been observed that the governments of the host country are facing problems with foreign direct investment. It has less control over the functioning of the company that is functioning as the wholly owned subsidiary of an overseas company.

This leads to serious issues. The investor does not have to be completely obedient to the economic policies of the country where they have invested the money. At times

there have been adverse effects of foreign direct investment on the balance of payments of a country. Even in view of the various disadvantages of foreign direct investment it may be said that foreign direct investment has played an important role in shaping the economic fortunes of a number of countries around the world.