Determinants, Benefits and the Risks of Foreign Direct Investment for Assignment

Determinants, Benefits and the Risks of Foreign Direct Investment for Developing Countries - Assignment Example It is evidently clear from the discussion that for the host country, it provides new technologies, products, skills of management, capital, strengthens its currency and thus leads to economic development. However, these benefits are not realized automatically and evenly. Architecture of international investment and national policies are important in attracting FDI to many developing countries and in realization of its full benefits for development. Although FDI is beneficial to both host and home countries, it also arise some costs to them. The benefits which a host country expects rely on the co-operation of its government. In developing countries such as Kenya, FDI contributes a lot in their economic development and the governments are working extremely hard to attract it. Actually, the global market for these investments is highly competitive and countries seek them to improve their development efforts. Foreign Direct Investment is regarded to be less prone to a crisis because the direct investors usually have very long-term plans when engaging in such investments in host countries. It is also believed that FDI greatly contributes a lot to the economic growth of a host country than other types of capital inflows. Therefore, this paper seeks to critically examine the determinants, the benefits and the risks of Foreign Direct Investment in developing countries. It tends to broadly analyze the factors that attract foreign investments, the benefits that the country intends to gain from direct foreign investment and the dangers associated with these kinds of investments. Foreign direct investment determinants refer to the factors (political, economic and social factors) that can attract or deter foreign investors from investing in a particular country. Stable economy, political stability and good social status are likely to attract foreign investments. However, instability in these three areas will scare investors away.