Developing countries and emerging economies have in the last few years increasingly come to see Foreign Direct Investment (FDI) as a source of economic development and modernisation, income growth and employment. Countries have more and more opened up for FDI. In the last decade of the 20-century, many countries moved away from the radical stance prohibiting much FDI toward a more liberal view. Pursuing a less restrictive policy toward FDI, liberalising their FDI regimes and pursuing other policies to attract investment. One result can be seen in the sudden increase in the volume of FDI worldwide, which has been growing twice as fast as the growth in world trade. Yet, the benefits of FDI do not increase automatically and evenly across countries, sectors and local communities. The challenges are primarily directed toward host countries, which need to establish an environment for investment. Host countries tries to maximise the benefits from FDI, and minimize the costs. Developing countries fear both that foreigners will invest in their country and that they will not invest. On one hand they fear exploitation and on the other hand they are concerned of lack of access to foreign technology, capital, marketing, and management skills. Industrialised countries worry about being both the recipients and source of FDI. They worry that the results of FDI outflow of a country may cause reduce employment opportunities at home and as FDI flow in foreigners may establish excessive influence and control over the local economy. There is a lot that could be said about FDI, but because of time limit, and page limit I choose to focus on the most basic and relevant points in this discussion about FDI. .
What do we mean by Foreign Direct Investment?.
Foreign Direct Investment occurs when a company invest directly in facilities to produce and/or market a product in a foreign country (International business, page 204).