What is FDI?
1) FDI is not only beneficial to certain individuals of the society; it is spread through out the economy via the theory of the multiplier effect. As workers of an investing firm are paid their wages, they would decide to spend it on their essential needs, which in turn, become the income for other certain individuals. This cycle is repeated, known as the multiplier effect. This ultimately boosts the economy of Thailand raising its standard of living.
2) This investigation will examine the positive and negative implications of Foreign Direct Investment (FDI) on the host countries as well as the investing companies. This study will also touch upon the differences FDI makes for developed countries as well as low economically developed countries (LEDC’s).
Introduction
Foreign Direct Investment is defined as ‘any equity holding across national boarders that provides the owner substantial control over the entity’ (see Appendix A). This is generally defined as a 10% holding or greater. Most FDI ends up being 100% ownership by a Multi-National Corporation (MNC).
FDI has increased dramatically in the past twenty years (see Appendix B need 2 find!), to become the most common type of capital flowing across borders in both developed and developing economies. For the most part politicians and economists welcome the increase of FDI to developing economies. It brings capital needed for economic development in the country in a way that is not as risky as borrowing from overseas. It may also bring a range of additional benefits. However there is conflicting evidence about the real world effects of FDI, which will be analysed during the course of this essay.
Firstly, this investigation will look at the posit ...