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Benefits of Foreign Direct Investment Essay Example

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Benefits of Foreign Direct Investment

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Benefits of Foreign Direct Investment. The research has identified that today, FDI is a part of most global economies and it plays an important role in the development of an economy of a country. It is now a fundamental part of the world’s financial system. FDI has raised the growth rate of the economies of developing countries and allowed them to grow faster than developed countries. There are many benefits of FDI in developing countries. The transfer of technology is not only restricted to actual technologies but also involve transfer of skills, methods of manufacturing and even entire facilities. It may as well refer to knowledge passed by institutions of higher learning and research. The inflow of FDI helps in transferring of these technologies and knowledge from one country to another.

For example, Asians had vast knowledge in IT sector and this knowledge was transferred to other countries of the world. FDI offers developing countries with cheap access to new technologies and knowledge thus improving their technological capabilities and ability to compete with others in the global markets. FDI assumes the responsibility of creating new jobs as well. As new firms establish their corporations in host countries, they create new jobs and opportunities. In 1997, it was estimated that close to 27 million jobs in developing countries were directly created by FDI. A real case is a Botswana where between 2003 and 2009, LionOre mining company from Canada created the highest number of jobs of about 4667.   In addition, it was also reported that for job directly created by FDI, about 1.7 other jobs were indirectly created. The created new jobs increase the income of the workers and leads development of competition. New jobs also raise the buying power of the population which in turn boosts the economy of the host country.  However, FDI is often attracted to developing countries with more and highly skilled and literate labor force. FDI will only increase the growth of an economy if the level of education in the host country is high. FDI also offers most women with employment in developing countries. With the increase in salaries, the employed citizens access better lifestyle and more facilities. Benefits of Foreign Direct Investment.

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