What Are The Theoretical Approaches To FDI?

What Are The Theoretical Approaches To FDI?

• Recently, there has been a strong shift toward the free market stance creating
• a surge in FDI worldwide
• an increase in the volume of FDI in countries with newly liberalized regimes

How Does FDI Benefit The Host Country?

• There are four main benefits of inward FDI for a host country
• Resource transfer effects - FDI brings capital, technology, and management resources
• Employment effects - FDI can bring jobs

How Does FDI Benefit The Host Country?

• Balance of payments effects - FDI can help a country to achieve a current account surplus
• Effects on competition and economic growth - greenfield investments increase the level of competition in a market, driving down prices and improving the welfare of consumers:
• can lead to increased productivity growth, product and process innovation, and greater economic growth;

What Are The Costs Of FDI To The Host Country?

• Inward FDI has three main costs:
• Adverse effects of FDI on competition within the host nation
• subsidiaries of foreign MNEs may have greater economic power than indigenous competitors because they may be part of a larger international organization

What Are The Costs Of FDI To The Host Country?

• Adverse effects on the balance of payments
• when a foreign subsidiary imports a substantial number of its inputs from abroad,
• there is a debit on the current account of the host country’s balance of payments

What Are The Costs Of FDI To The Host Country?

• Perceived loss of national sovereignty and autonomy
• decisions that affect the host country will be made by a foreign parent that has no real commitment to the host country,
• and over which the host country’s government has no real control