|
In order to improve your levels of Foreign Direct Investment, you must be running a correct FDI Strategy. There are many ways to achieve this, the majority of which are hugely beneficial to the country. This is to say that an increased level of FDI as a result of a stronger FDI Strategy is not always the best objective to strive toward. The impact of FDI can vary from country to country. Usually it involves foreign businesses growing into a host country as a result of mergers and acquisitions or through the construction of new facilities. Typically the impact of increased FDI and therefore an improved FDI Strategy is seen as positive for the host country because of the increases in technology and information it can bring. For example a multi-national corporation building a factory in a new less economically developed country will bring with more productive machines and more advanced and efficient methods of production. In this way the better FDI Strategy gives rise to job creation and further stimulation of the economy through increased domestic investment. However, as previously mentioned, more FDI is not always a good thing – in fact at times it can be far from the best option available! Multi-national corporations often build new facilities in less economically developed countries to take advantage of the cheaper labour and production costs. This is known as vertical FDI in which a foreign firm invests into the host country to add value to a product. For example a country with a cheap and flexible labour force may have a foreign firm exporting fabrics into it to be made into clothes at a lower cost. Due to the poorer economic conditions in the host country, the workers are more willing to work in poor conditions and for small wages. This is effectively an exploitation of workers and is a huge negative impact of a higher FDI ranking which stems from a ‘better’ FDI Strategy. While a strong FDI Strategy is seen as a positive driver of economic growth, the host country can become dependent on the multi-national corporations it attracts and in effect unintentionally give over some bargaining power and autonomy. Furthermore these multi-national corporations that bring with such advanced technologies can inhibit the growth of local businesses. Although these local businesses may have the capacity to be more productive in the future, the competitiveness of the multi-national corporations means the local businesses which haven’t yet grown enough to utilise economies of scale cannot compete and are forced to close down. In this case it is possible that an improved FDI Strategy has inadvertently caused jobs to be lost by stopping new local businesses from flourishing and realising their potential. In conclusion, the impact of a strong FDI Strategy is not always as positive as is commonly thought and can in fact reverse some of the benefits of FDI altogether.
Related Articles -
FDI Strategy, Foreign Direct Investment Strategy, Country Brand Strategy,
| 
