Wednesday, December 28, 2011

Foreign direct investment (FDI)

The expression foreign direct investment (FDI) is one that has become very popular in the present dispensation.

More to the point, liberalization in some countries seems to encourage foreign investors to set up businesses in these countries.

In most cases, the normal practice would be for the investors from a stronger economy to invest in smaller economies.

Thus, most people associate FDI with American countries operating in Mexico, China, Brazil or smaller countries in Africa and Asia. Some reasons for direct foreign investmentmay include lower taxes, low costs of labor, tax concessions or superior currency value.

Other advantages may include the presence of large markets in the foreign countries and favorable banking policies. In some cases, certain countries encourage investors to invest in the industries where local investors may not be able to cope.

There are instances where investors from developing nations can invest in the developed economies of Canada, America and Europe.

For instance, there are investments in America owned and operated by rich investors from Dubai, Saudi Arabia and Kuwait.

For instance, no country will want its arms industry to be controlled by any foreign firms for very obvious reasons.