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Impacts of Fdi

In: Business and Management

Submitted By imranazmi1992
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IMPACTS OF FOREIGN DIRECT INVESTMENT (FDI)
Resource Transfer a) Capital Inflow
Multinational companies that are able to do FDI usually have big funds. This might be because big multinational companies have good reputation to get loan from bank, compared to the local companies. With the inflow of capital into the host country, it will help the state to build better infrastructure, develop competitiveness in the industry, and boost the economy. b) Technology Transfer
In any nation, the importance of technology is very important as it transfers to the growth of economy. Whenever FDI takes place, technology is transferred from the home country to the host country. It may be in form of machine transfer or knowledge transfer. For example in Malaysia, Proton collaborates with Lotus, and the technology of manufacturing car is transferred although it is not 100%. The vehicle manufacturing technology also help other Malaysian industry like rubber industry in making tires. c) Managerial Skills Transfer
Management know-how is required through FDI process gives important benefit to the host county. Local employees hired by MNC are exposed to latest management skills that will improve the efficiency of operations in the host country. When foreign managers leave the firm, the trained local personnel will help to build indigenous firms, causing a beneficial spin-off effect to the host country.
Employment Effect
FDI brings more beneficial employment prospects to the host country by creating jobs that otherwise would not exist if the foreign did not invest in the country. FDI causes direct and indirect effect in term of employment. The direct effect is when the foreign company hires local employees. The indirect effect is job creation to the suppliers as a result of foreign investment. In Malaysia, Toyota has created 4000 jobs.
Increase Competition in Local Market…...

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