You agree or disagree with statement that FDI (Foreign Direct Investment) brings benefits in a country where investment is done. If you have been given an option for investment will you choose FDI or not? Give example & reasons in support of your answer.
Answers
Explanation:
Foreign Direct Investment (FDI) is the investment of funds by an organisation from one country into another, with the intent of establishing ’lasting interest’. According to OECD (Organisation for Economic Co-operation and Development), lasting interest is determined when the organisation acquires a minimum of 10% of voting power in another organisation. For instance: the act of an Indian company such as Ola opening another headquarters in Sydney, Australia will be considered as bringing FDI into Australia.
Reinvestment of profits from overseas operations, as well as intra - organisational loans and borrowings to overseas subsidiaries are also categorised as FDI.
The meaning of FDI is not restricted only to international movement of capital. Its definition also encompasses the international movement of elements that are complementary to capital - such as skills, processes, management, technology etc.
There is a difference between FDI and FPI (Foreign Portfolio Investments), wherein the investor purchases equity of foreign companies. FPI means only equity infusion, and does not imply the establishment of a lasting interest.
FDI can be Greenfield, wherein an organisation creates a subsidiary concern in another country and builds its business operations there from the ground up. Greenfield investments provide the highest degree of control to the organisation. It can construct the production plant as per its specifications, employ and train human resources as per company standards, as well as design and monitor its operational processes.
Alternatively, FDI can be brownfield - wherein an organisation expands by way of cross-border mergers, acquisitions and joint ventures - by either leasing or purchasing existing facilities for its production. The clear advantage of brownfield investments is the savings in cost and time for starting up, as well as engaging in construction activities. Addition of equipment to an existing facility also qualifies as brownfield investment.
It is difficult to overstate the global and macroeconomic significance of FDI. As per UNCTAD (United Nations Conference on Trade and Development), global FDI amounted to around $ 1.8 tn in 2015.
There are many ways in which FDI benefits the recipient nation:
I will choose FDI (Foreign Direct Investment)
Explanation:
- I will choose FDI (Foreign Direct Investment) for investment because it plays an important role in socio-economic development of nation. They contribute to the development of the developed nations.
- FDI contributes to advantage of the domestic investment, employee generation and exports. The FDI provide direct benefits to the domestic labor as they get higher real wages because of increase in productivity.
- FDI benefits the consumers by providing better quality products, new products and also at a lower product price for the consumers.
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If you have been given an option for investment will you choose FDI or not? Give example & reasons in support of your answer.
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