Foreign Direct Investment ( Fdi )

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Foreign Direct Investment (FDI) is a major or key element in international economic integration. Foreign Direct Investment creates a stable, direct and long lasting connections between economies. It therefore encourages the transfer of technology know how between countries and allow the host country to promote its products more widely in international markets. It is also and additional source of funding for investments and it can also be an important form of development. Foreign Direct Investment is an investment in a business firm by an investor from another country in which the foreign investor has control or a significant degree of influence over the company or firm. The Organization of Economic Cooperation and Cooperation…show more content…
High inflow of foreign investment is needed for a country to gain a high sustainable economic growth. For an economy to grow by 7 to 8 percent a year, there is a need to invest about 30 to 40 percent of GDP. FDI is good and strong developmental equipment that contributes to the economic growth of host country. This growth are contributed by the high increase of capital stocks in the host country, increase in productivity and availability or creating of new jobs. These new creation provided by FDI also leads to productivity and knowledge spillover on the domestic firm. Productivity and knowledge spillover increases when the productivity of the local firm is gained through the leading edge of technologies employed by the foreign companies. However, there is some negative impact on this because the foreign firm or investor has the ability to draw the demand away from the local firm because of the price of reduction to their new different and innovative products or goods and due to this, the local firm’s productiveness will decrease because of the market run down by the foreign firm or investor. The ability of a local firm to take the spillover benefits is dependent on how the local firm takes in the foreign firm skills and technological know how. Employment: The employment effect of FDI on the host country is basic
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