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Foreign Direct Investment ( Fdi )

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There is no doubt that foreign direct investment (FDI) can do a lot of good for a country, for instance it can add to an economy’s productive capacity and import not just capital but technology, production skills and better management. Multinational Corporation (MNC) is a large corporation which produces or sells goods or services in various countries. MNCs often seek out developing countries in order to set up a branch of their corporation in that host country and they do this to seek out several benefits. One benefit is that the MNC can bring their product to a new market that may not have previously had it. Another reason to produce goods in a country that is not its home country is primarily because; in developing countries the MNC can…show more content…
The question is whether the FDIs and MNCs are actually beneficial to the host country and the home country or is it an exploitation of a developing country by a more developed country. Since the FDIs and MNCs operate on a global scale what else influences the economy such as monetary exchanges and even human rights such as child labor. There is an increasing recognition when it comes to understanding the forces of economic globalization which requires looking first at foreign direct investment (FDI) by multinational corporations (MNCs); which is when a firm based in one country acquires production facilities in other countries or invests in businesses in that country for a voting share. “While real world GDP grew at a 2.5 percent annual rate and real world exports grew by 5.6 percent annually from 1986 through 1999, United Nations data show that real world FDI inflows grew by 17.7 percent over this same period” (Bernard). Bernard, Jensen, and Schott also found that ninety percent of U.S. exports and imports flow through a MNC, with around fifty percent of U.S. trade flows occurring between different affiliates of the same MNC. (Bernard)
As far as capital is concern, multinational enterprises (MNEs) invest in long-term projects, taking risks and repatriating profits only when the projects yield returns. The free flow of capital across nations is likely to be favored by many economists since it allows capital to seek out the highest rate of return. Many MNEs, by
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