inflow of foreign exchange resource and removes the constraints on balance of payment. This advantage is more important than bringing capital, which perhaps can be had from the international capital markets and the governments. The governments or corporations have to repay. The Consumer may have a wider choice. Foreign Direct Investment is an effective source of this additional capital and comes with its own risks. The foreign investor will also bear the risk.
Foreign Direct Investment helps in accelerating the rate of economic growth as follows:.
FDI provides Capital: Foreign Direct Investment is expected to bring needed capital to developing countries.
Foreign Direct Investment and the Chinese Economy : Theory and Impact.
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In the context of FDI this fixed liability is not there. In the absence of this investment, these employment opportunities would not have been available to many developing countries. The developing countries need higher investment to achieve increased targets of growth in national income. Relatively higher skilled jobs would receive higher wages. FDI not only creates direct employment opportunities but also through backward and forward linkages, it is able generate indirect employment opportunities as well. FDI provides Increased Employment: Foreign enterprises by employing the nationals of developing countries provide employment. Advertisements: This means that they have to repay loans along with interest over a specific period. The foreign investor is expected to generate adequate resources to finance outflows on account of the activity generated by the FDI.