Why is foreign direct investment important?

Asked 16-Mar-2018
Viewed 905 times

1 Answer


"Foreign Direct Investment"

Why is foreign direct investment important?There is a powerful relationship between foreign investment and economic process. Larger inflows of foreign investments square measure required for the country to attain a property high mechanical phenomenon of the economic process. There are many positive reasons for this. For the economy to grow by seven to eight percent a year there's a requirement to speculate around thirty-five to forty percent of the gross domestic product. National savings fall so much wanting this by nearly ten percent.

Foreign borrowing and foreign investments have to be compelled to meet this investment-savings gap. This is often usually recognized and serial governments have tried to supply varied incentives to foreign investors. But the Sri Lankan record of foreign investment has been so much below expected levels and low as compared with several different Asian countries.

Foreign investment comes in many forms. Portfolio investment, foreign loans and foreign direct investment the 3 vital varieties. Among which foreign direct investments in business and services square measure the foremost helpful. Foreign loans are basically used for investment in infrastructure. This is often vital as a heavy bottleneck for domestic moreover as foreign investment is that the poor state of infrastructure.
The significance of personal FDI is that such investments are innocuous to the country and convey the benefits of advanced technology, management practices, and warranted markets.

In due course, there's a technology transfer because the native force gains data of the producing processes and management practices. The worth supplementary in these industries could be a contribution to gross domestic product and interchange earnings. So FDI contributes to interchange earnings, employment creation and will increase in incomes, particularly of accomplished and semi-skilled staff in these industries.

Well, these were the few points that had portrayed the best of Foreign Direct Investment and more to come…