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The Government needs to put in some measures like the tax cuts and the development of the infrastructure to attract the FDIs.
The Foreign Direct Investment is one of the major focuses for the development of the modern economy. Most of the countries in the world have developed due to the influx of the Foreign Direct Investment (FDI). It has been a major force for the growth in some of the countries. FDI has assumed a form of a global activity. It can be said to be an activity where a citizen of a country invests in another country. The investment can be in a new Greenfield project or in some existing projects. There may be investments in the shares of the company, which helps, in the global capital transfer. Therefore, the FDI helps in the economic development of the country as a whole. The scope of FDI is huge and it has a widespread impact on the global economy. The trends of the FDI show that it assumed its peak in the last decade of the last century. This was the period when the countries all over the world were opening up the borders of the economy and there was an increased level of development in the globalization process. The new decade saw the level of FDI decrease to a certain extent. This can be accredited to the fact that the FDI corrected itself to a sustainable level. The FDI in the modern world consists of the mergers and acquisitions of the global companies in different countries. The level of FDI in a country depends on several factors like the state of the economy, the condition of the industry, the tax structure etc. Some of the countries like Luxemburg have become attractive destinations for the FDI as the tax structure is favorable. (OECD, 2003; Pp 157-159).
The FDI has been influential in the development of the countries in the South East Asia. The countries like the Philippines, Thailand,
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Research studies indicate that there is direct relationship between FDI and financial markets. According to the research studies, structural changes in financial markets have been used in attracting FDI. The general view is that stock markets have been established with the main reason of intermediating funds towards investment projects (Hui and Margarida 210).
Realizing the importance of this concept, this report covers a comprehensive review of the impact of foreign direct investment on economy. This review takes into account empirical evidences and other related information which particularly considers the role played by foreign direct investment in supporting the economic developments in developing world.
FDI can also be defined as an investment of a company in a foreign country by building a factory within the host country. It is through a company’s direct investment in machinery, building and equipment in another country that foreign direct investment is made possible.
Inward FDI increased from 9.6% of GDP in 1990 to 26.7% in 2006. (Woodward, 2011). There has also been a recent flow of FDI towards developing economies and this has had a plethora of effects, both for home and host countries. (Raj and Sager, 2005). Foreign Direct Investment has over the last three decades aroused conflicting responses from the first and third world.
The closer linkage between and among global powers has precipitated more interdependence and better business opportunities among countries, but when economic crises strike more seriously than expected countries suffer economic losses, which sometimes cannot be solved by the International Financial Institutions (IFIs).
Some of these countries became full European Union (EU) members in May 2004. They also experienced a significant increase in foreign direct investment (FDI). As a consequence, the ratio of inward FDI stock to the 12 CEE countries studied here in total world inward FDI stock increased more than three-fold, from 0.81% in 1994 to 2.89% in 2004.
(Wikipedia, 2006). After the 1960's, foreign direct investments (FDI) have increased at a steady rate, with FDI stocks making up twenty percent of the world's Gross Domestic Product (GDP). Currently, China leads the world in foreign direct investments.
The author states that a multinational firm in a developed country may face higher labor costs and higher production costs when locating its subsidiaries in its own home country, while a shift overseas may involve a larger initial investment but is economically beneficial in the long run because the margin of profits are higher.
a growth-augmenting constituent has received great interest from developed nations in general and less developed nations in particular in current decade. It has been an issue of great concern for several economists regarding how FDI influences economic growth of the host
rategies that enable entities to diversify its assets and risk across diverse countries by engaging in contractual agreements with multiple potential partners. Companies may find it advantageous by producing in foreign countries compared to exporting to those countries based on
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