Foreign Direct Investment By Multinational Corporations

The impact of foreign direct investment (FDI) on development is a much-debated topic. Over decades, many international financial institutions, such as the World Bank and the IMF, have increasingly promoted FDI. However, on the other hand, many NGOs, labor unions and civil society groups have emphasized the negative effects of FDI. Thus, to answer this question, we should always consider both of the pros and cons of FDI.

According to the World Bank, from 1993 to 1998, poverty rate has reduced by 14 percent in developing countries, similar to about 107 million people. This may result from receiving foreign investment that plays an important role in local economy growth. For example, the proportion of population living in poverty in India decreased by half in the two decades, from the 1970s to 1990s, while the number of Chinese in poverty declined by approximately 210 million during twenty-one years, from 1978 to 1999 (Healey 2008). In other words, the standard of living is improving due to the benefits of international economic activities.

Foreign direct investment by multinational corporations is the action of obtaining controlling equity share of a firm in a foreign country. There has been many discussions about the role of FDI in affecting a country’s unemployment rate and economic growth. Of which many believed

First of all, the investment flow into the host country does not produce an immediate effect but accrues benefits over a period of time and the level of the positive effect may vary from country to country. The conditions that FDI faces in the developing countries may slow down the process. The issue is that in order to make use of all benefits, which were discussed earlier, the host country has to have a certain level of education, technology, sufficient openness to trade and appropriate policy regulations. The restrictive policy or insufficient precondition state of economy of the host country will not bring the expected advantages. Moreover, the developing states having a low development level may experience certain disadvantage of the foreign direct

“Globalization increases poverty” is a typical statement created by critics of globalization. In the past century, a substantial number of developing countries have struggled with economic growth. Globalization plays an essential role in the economy as it assists in elevating the GDP of the country in questions and consequently leading to the diminished poverty level. This research seeks to address the following fundamental concepts/ questions: what impact does globalization has in developing countries in matters pertaining poverty reduction? The paper's structure is as follows. The first section outlines the definition of globalization. The second section evaluates technological advancement through reduction of poverty on globalization. The third section explains the essential meaning of trade liberalization and the influence on development in Periphery countries. The fourth section presents foreign direct investment linkage in globalization and poverty. The fifth section explores the processes of development motives. The sixth section presents a case study that is primarily connected to globalization impact on developing countries. Lastly, the seventh section explains the impact of globalization on economic policy on developing economies.

For example, a big corporation may choose to develop manufacturing business in a poorer country that has a comparative advantage in labor. Investors will benefit by utilizing the labor abundant workforce to meet the demands of competition, and the domestic country will experience dynamic growth from new technology, jobs, and human capital. Thus, global markets expand from FDI which is an effective source of economic development, especially in developing nations.

Foreign direct investment (FDI) is created when a company buys assets in foreign country and invest in foreign countries property, plant or equipment, and also the participation a joint venture with a foreign local company. In addition, when a company begins FDI, the company will become a multinational company. Foreign direct investment has been spreader significantly in the previous two decades through the world economy. More and more countries and sectors has constitute to become one of the international foreign direct investment network. An important force creating better global economic combination are represented by different types of FDI. (Mody, 2004). In the following discussion, there will be reasons why China remained

According to the International Monetary Fund (IMF), Foreign Direct Investment (FDI) is defined as “cross border investment where a resident in one economy has control or a significant degree of influence on the management of an enterprise in another country.” FDI in the past decade has grown intensively, exceeding the growth of world production and the growth of international trade (Dierk, 2008). Many nations are open and engage in FDI because it will benefit domestic firms. Brazil, a top emerging market, has experienced record number of FDI projects, establishing it as the second most popular global destination in terms of FDI value. The country has experienced steady growth over the past decade and is projected to keep increasing its number of FDIs.

In today 's developing economies the competition to attract foreign investment and expanding trade relations has become the foremost economic strategy to satisfy the quest of the society for rapid economic growth. The failure of inward-looking economic policies to change the trajectory of decades long stagnated economies forced countries to adopt outward-looking trade policies and market economy. As a result, attracting foreign investment and promoting exports emerge to be the core economic and trade strategies. Foreign investment is believed to provide multidimensional benefits to the host economy both directly and indirectly. The main direct benefit is the capital inflow that fills the finance gap between the required investment and

that the reliant variable is affirmatively altered by commercial factors. Saltz (1992) examined the result of FDI on commercial development for the third globe countries. His explanations concur alongside those of Bos, Sanders and Secchi (1974), that the level of output of a host state will stagnate in cases of FDI whereas there could transpire monopolisation and pricing transfers, that will cause under-utilisation of labor, that will cause a lag in the level of internal consumption demand and in the end will lead development to stagnate. Barrell and Pain (1999) discovered the benefits of FDI by U.S. multinationals in four European Coalition states and discovered that FDI could alter the host country’s presentation affirmatively in cases whereas there are transfers of knowledge and vision nevertheless the FDI to the host economy. Carkovic and Levine (2002) endeavored to reassess the connection amid FDI and commercial development for 72 states above the era 1960-1995. Their aftermath indicated that for both industrialized and growing economies FDI inflows did not exert an autonomous impact on commercial growth. Specifically the exogenous constituent of FDI did not exert a reliable affirmative encounter on commercial development, even permitting for the level of education, the level of commercial progress, the level of commercial progress and transactions openness of the recipient country. Brada,

The negative impact of transnational corporations in the developing countries’ economy is undeniable. According to Blank & LaPalombara (1980), the biggest obstacle of the developing countries’ economy is the transnational corporations. The process of globalization granted these multinational companies free access to the international local markets all over the world. Their business practices outsource labour markets of these underdeveloped countries. As more and more of these poor nations’ citizens turn to these companies for employment,

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 (FDI) has been considered important for the growth of a country. When the individuals or companies from a country invest in another country, it is regarded as FDI. FDI not only strengthens the manufacturing base of the host country but also contributes to the strengthening of the economic outlook. FDI can be seen as an investment that leads directly to job creation in an economy. The unemployment rate decreases due to FDI, which leads to stability in economic, social and political spheres. This leads to establishing the notion that FDI is necessary for a country because it helps in strengthening the economy of a particular country. Ireland has been benefitted by

The role of multinational corporations (MNCs) in emerging economies is growing, as shown by the growth of foreign direct investment (FDI), which in 2015 stood at $681 billion, up from $671 billion in 2013 (UNCTAD, 2015). Despite the above positive changes, some countries remain marginal areas in global terms. While emerging economies collectively account for 83% of the world 's population, they only account for less than 32 % of global gross domestic product (GDP) and FDI (UNDESA, 2015; WB, 2015). Consequently, the extent of economic and social challenges facing some developing countries remains enormous despite decades of MNC investments. One major social problem facing many of the emerging economies is still high levels of human poverty (UNM-MDG, 2015). Some African countries such as Zambia, are faced with the challenge of a large proportion of the population living in abject poverty (Gamu, le Billon, & Spiegel, 2015). The challenges prevail despite more than two decades of applying macroeconomic (basically structural adjustment programs) and microeconomic interventions (specifically through increased availability of microcredit) (Turyahabwa, 2014). According to the UN Millennium Development Goal Report of 2015 (UN-MDG, 2015), about 38% of the poor population in sub-Saharan Africa is chronically poor. At the current pace of development, the region is unlikely to achieve the Millennium Development Goals for poverty reduction within a stipulated time frame: by 2147

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).