FDI BY MNCs

Foreign Direct Investment in Developing Countries

Foreign Direct Investment in Developing Countries

Introduction

Multinational corporations (MNCs) have become a major driver force in the global economy and their significance keeps on growing all over the globe. The increased pressure of multinational corporations in developing countries is mainly outstanding. Today developing countries report for nearly one third of total outstanding entries of foreign direct investment (FDI), however, in 1990, it was just around one fifth.

The increase of FDI in developing and emerging economies suggests that it may contribute to their development to the extent that they can derive significant benefits such as job creation, quality life and education and introduction of modern production technology and management. This is also the reason why many governments have introduced policies to attract direct investment from abroad. However, the activities of multinationals are also very controversial and create concerns in public opinion. In the recent years MNCs accused of unfair competition, for example, because they take advantage of lower wages and poor working conditions that normally observed in some foreign developing countries. They are also accused of violating human rights and labour rights in developing countries where the authorities do not truly respect these rights.

Current trends in developing countries highlighted the role of FDI that it can play a significant role in accelerating economic growth and transformation. Generally, it had been witnessed that the development countries seek to attract and employ foreign direct investment in their country for the number of factors because foreign investment has numerous positive impact on the economy (Nelson, 2009, pp. 121-128).

Discussion

The purpose of writing this paper is to highlight the role of Foreign Direct Investment (FDI) in the developing countries. For this purpose, the author focused on different aspects, which involved in the FDI, for example economic aspects, legal aspects etc. Similarly, further moving on the author placed emphasis on the role of the FDI regarding the poverty, whether it help in reducing the poverty or not. While focusing on FDI, multinational corporations (MNCs) also had a very critical and vital role in bringing the foreign direct investment in the developing nations because the general observation is that multinational corporations bring huge investment to host country and new jobs created in the market, which helped the economy of the developing country.

Economic policy framework

About a decade ago, the developing countries began to liberalize their national policies for the purpose to create a relatively welcoming FDI regime by easing the rules and regulations to enter into the local market and improving the foreign investments by treatment the firms with proper rules. These measures considered to be the core for FDI because it softens the policies for the FDI to enter into the markets of developing countries. However, policy changes have an asymmetric effect on the location of FDI: those aimed a greater openness and allow firms to establish at a given location, but do not guarantee their arrival. In However, those that tend to reduce the opening (nationalization or foreclosure, for example) reduce to sure the FDI.

The general framework of FDI is a determinant of implementation of investment among host ...