The importance of foreign direct investment

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The importance of foreign direct investment

  1. 1. THE IMPORTANCE OF FOREIGN DIRECT INVESTMENT
  2. 2. DEFINITION• Definition of Foreign Direct Investment (FDI) in economic term is own and investments made ​by foreign parties in a country.• Examples are as a company in Japan, Toyota has opened a plant in Shah Alam, Malaysia is consider as foreign direct investment (FDI).
  3. 3. THE ADVANTAGES OF FDI• foreign expertise can be an important factor in improving the existing technical processes in the country.• advances in technology and process it improves the competitiveness of countries in the domestic economy.• can improve the quality of products and processes in a particular sector, increased attempts to better human resource.
  4. 4. • can create jobs, in an effort to increase productivity, skilled and semi-skilled workers needed.• further reduce unemployment and thus reduce social problems.• expertise transfer, research and development requires the fees to the high cost of developing the technology.
  5. 5. THE DISADVANTAGE OF FDI• the parts that the host country economically backward is always comfortable when the flow of Foreign Direct Investment is affected.• They need to ensure that entities that make Foreign Direct Investment in these countries comply with environmental regulations.• the host country has a number of state secrets is something that not meant to be exposing to the world.
  6. 6. • It is notes that the defence is at risk because of Foreign Direct Investment in the country.• require a higher travel and communication expenses.• Language and cultural differences that exist between countries and investors of the host country also cause problems in the case of foreign direct investment.
  7. 7. Impact of FDI on small and large businessDefinition of small business• Small business enterprise is defined as a capital of less than RM250 thousand, having employees who are not more than 50 people and managed by one or two managers only.• Small business is divided into sole proprietorships and partnerships.
  8. 8. Definition of large business• Large business is an organization that has grown beyond the limits of medium businesses have 250 or more employees.• company size is one adopted by the UK Department for Business Enterprise and Regulatory Reform for statistical purposes.
  9. 9. • Stability FDI – FDI inflows may be affected if there are changes in exchange rates in the country compared with other sources of private investment or loan portfolio – FDI can stimulate product diversification through investments in new business, so reducing market dependence on a few sectors / products (UNCTAD 1999).
  10. 10. • Social development – to generate and grow the business in developing countries • the recruitment employees has been an increase jobs, • increase wages • replace declining market sectors • wage differentials between income groups will be exacerbated
  11. 11. ConclusionForeign investors have an important role in economicdevelopment. This is because foreign investors haveopened a new dimension by creating new industriesin developing countries.

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