Foreign Direct Investment On Infrastructure Within Developing Countries. Economics Essay

1307 words - 6 pages

“What is the impact of foreign direct Investment on infrastructure within developing countries such as India and China “
Globalization encouraged trade between different nations for goods and services it also provided the platform for economies to integrate much easier and efficiently. As the world developed into a new era developed economies saw the advantage of investing in developing economies such as China and India. FDI is a key driver that helps build economies as it can provide external finances without creating further debt to the host country along with the possibility to boosting employment, output and enhancing the labour force with new and efficient skills.
The 90’s saw a boom in FDI occurring in many developing countries some were concerned about the uncertainty and risk attached with such investments due to the lack of information available and evidence to provide forecasts. Many regions in Africa have been dismissed to the bleak, unusable land and poor infrastructure however China has invested nearly $12.3bn into areas such as dams, manufacturing, railroads and continues to invest within Ethiopia proving there is more to come from such economies. It is important to look at both ends of the spectrum although FDI within infrastructure can improve the stance of an economy by providing multiple avenues for a nation to distribute a number of goods and services we must identify the impact on the domestic market with issues regarding cheaper and better quality products, high levels of competition and a influx of new culture which many not integrate within the host country.
Foreign direct Investment has been a key source in building a number of economies. FDI typically occurs when one company is seeking to expand their operation into another country either by establishing business operation or acquiring business assets. There are a number of ways in which FDI occurs firstly you have inward FDI, an external or foreign entity either investing in or purchasing the goods of a local economy or outward FDI, when a domestic firm plans to expand operations in foreign countries. Ideally FDI serves purpose at both micro and macro level as FDI can provide external finances without creating further debt to the host country along with the possibility to boosting employment, output and enhancing the labour force with new and efficient skills. Furthermore it can improve the technological stance of a developing economy. There are many areas, which FDI can be targeted towards for example infrastructure; many developing countries have poor roads, inadequate working spaces or facilities are not close enough to the main areas of business. As time passed by the 90’s saw a boom in FDI occurring in many developing countries some were concerned about the uncertainty and risk attached with such investments; firstly the infrastructure is more than likely to lead to market failure eventually leading towards government regulation as well...


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