ADVANTAGES OF FOREIGN DIRECT INVESTMENT

1. It provides local economic benefits in multiple locations.

The companies or individuals that participate in FDI can stimulate community economic growth on the local level for their headquarters or home. Profits are often reinvested into workers or increasing organizational opportunities, which can create new jobs, which then creates new FDI opportunities. The investments do the same for the home market of the foreign organization as well.

2. It makes international trade easier to complete.

Many countries have import tariffs that must be paid for goods and services. Import/Export businesses can struggle to keep products at affordable prices for customers because of these taxes. Through FDI, it becomes possible to limit or eliminate these tariffs since a minimum stake in a foreign organization occurs. That gives the local business more control over the market while maintaining price competition.

3. Foreign income can increase.

Many foreign markets have employees working at wages that would be considered poverty wages in the United States. A majority of the world earns less than $4 per hour. Some international markets offer less than $1 per hour. With FDI, foreign income levels can increase. Worker wages increase. That creates new resources that can help communities to begin growing.

4. It improves human resources.

Businesses are successful because humans have expertise. In the under-developed and developing world, human skills are limited to basic labor, agricultural work, and other entry-level skills. Foreign direct investment creates educational opportunities so that people can improve their personal skill base. With better skills, higher wages can be earned. Greater productivity levels are achieved. The company benefits, as does the individual, and that trickles down to each community.

5. It allows your money to work harder for you

To encourage FDI, many governments have placed tax incentives on this type of investment. That makes more money available to work for a foreign company without disrupting the investing agency’s budget dramatically. These incentives make it easier to accomplish goals because the money involved can be directed toward resources instead of government coffers. At the same time, the gap between cost and revenue is reduced, providing more opportunities to find profit streams.

6. It provides a foreign company with needed experience.

Investors bring more than money to an FDI relationship. They can also bring their personal experiences within a specific industry. For the foreign company, such an investment can create an immediate surge in productivity. Investments can also provide better facilities for the foreign organization, better equipment assets, and improved vendor access if contact access from the investor is permitted in the relationship.

7. It creates new opportunities for workers.

Workers who are employed by the investing company can travel overseas and experience new cultures and ideas. That can make them more productive at home. Foreign workers have better access to the best practices that have been developed, which helps them to create new opportunities as well. This process helps both parties grow faster than if they were on their own.

Leave a Reply

Your email address will not be published. Required fields are marked *