Foreign direct investment Assignment Example | Topics and Well Written Essays - 1500 words - 1

Foreign direct investment - Assignment Example Foreign direct investment involves acquisition of managerial control in a company. The threshold of this form of ownership is 10% or more in UK. This varies across countries. With the liberalization of the various global economies in Africa and Asia this form of investment has grown considerably. Foreign direct investment (FDI) facilitates the interaction of two firms and economies with varying economic differences. The foreign investors invest their funds with a long term perspective to exploit the cheap labour costs, strategic advantages, rich natural resources, market etc of another economy. In short this form of investment involves investing within the firm but outside the region. Importance of FDI This form of investment provides the necessary capital required by some developing economies which might be difficult to generate through domestic means. Besides the financial resources the foreign direct investment also provides the opportunity to make use of sophisticated and latest technology. It has been seen that the companies with no prior experience face problems in the import of such technology as this is deemed to be risky as well as expensive. With time FDI imparts a number of benefits to the host country that was hitherto not available. This includes upgrading of industrial operations, transferring of advanced technology, training the labour force, introduction of developed methods of accounting & modern management, developing the trading and finance related networks and up gradation of telecommunication related services. In sectors like services FDI uplifts the competitive strength of the host country by increasing the productivity of financial resources.