Effects of Foreign Direct Investment Essay Example for Free

Effects of unconnected Direct Investment EssayThe possible supreme and proscribe effects of FDIinflowsIng. Tom miss, PhD.Possible positive effectsFDI provides capital which is usually missingin the position countryLong term capital is suitable for economic evolutionForeign investors ar able to finance theirinvestments projects better and often cheaperForeign corporations create new workplacesPossible positive effectsFDI fetch new technologies that are usuallynot available in the target country.There is empirical evidence that there are spillover effects as the new technologies usually blossom beyond the foreign corporationsForeign corporations provide better access toforeign marketsEx. Foreign corporations can provide usefulcontacts even for their interior(prenominal) subcontractorsPossible positive effectsForeign corporations bring new know-how andmanagerial skills into the target countryAgain, there is a spill-over effects as people leave the corporations they leave with the companionship and know-howthey accumulatedForeign corporations can help to change the economicstructure of the target countryWith a good economic strategy governments can curl upcompanies from promising and innovative sectorsPossible positive effectsCrowding in effectThe foreign corporations often bring additionalinvestors into the target country (ex. their usualsubcontractors)Foreign corporations improve the businessenvironment of the target countryEthical business or rules of conductPossible positive effectsForeign corporations bring new cleantechnologies that help to improve theenvironmental conditionsForeign corporations usually help increase thelevel of wages in the target scrimpingForeign corporations usually have a positiveeffects on the trade balancePossible negative effectsForeign corporations may buy a local companyin order to shut it down (and gain monopolyfor example)Crowding out effectWe can see this effect if the foreign corporationstarget the domestic market a nd domesticcorporations are not able to compete with thesecorporationsPossible negative effectsForeign corporations may cut workingpositions (privatization deals or MAtransactions)Foreign corporations have a tendency to usetheir usual suppliers which can lead toincreased imports (no problem if theproduction is export driven)Possible negative effectsRepatriation of the profits can be stressful on thebalance of paymentsThe high growth of wages in foreign corporationscan influence a similar growth in the domesticcorporations which are not able to cover this growthwith the growth of productivityThe result is the decreasing competitiveness of domesticcompaniesPossible negative effectsMissing tax revenuesIf the foreign corporations receive tax holidays orsimilar provisionsThe emergence of a dual economyThe economy will contain a developed foreignsector and an underdeveloped domestic sectorPossible negative effectsPossible environmental damageIncentive tourism