Foreign direct investments are the investments which are invested by the foreign investors into a country to generate profits and spread their business in that country. The FDI is probably most attractive thing for the governments of the countries which is considered very good for the economic health of the country and governments provide feasible and favorable conditions to attract FDIs into their country. Especially developing countries strive hard to bring foreign investments into the country to minimize the negative balance of payments and for the economic uplift of the country as these investments create job opportunities and provide a mean of financial activity.
But, do these FDIs come without any negative impacts on the economy and the society?
No, there are certain threats which are associated with the associated with the FDIs.
First thing, when the FDI comes into the country, it is beneficial for the country but, after the business is established from that investment, that business earns the profits and then the foreign investor take the most of the profit, which becomes the out flow. Thus it provides short term benefits to the country and in long run it contributes towards the outflows of the country.
Second thing, when FDI comes into a country it takes foreign style of business, foreign culture and their traditions which affect the local traditions and damage the local traditions and culture.
Then, there is competition factor which destroy the local industry because foreign investors can afford better technology. Some people argue that FDI also boost the technological advancements in the country but they ignore the fact that they need that technology to get an edge over the local industry.
The point here is that we may attract FDI for the short run stability but we will have to strengthen the local market for the long term sustainable growth.