Foreign Direct Investment: Trends and Determinants
                     FOREIGN DIRECT INVESTMENT: 
TRENDS AND DETERMINANTS
Economic 
Development 
Stimulation
Foreign direct investment 
can stimulate the target 
country’s economic 
development, creating a 
more conducive 
environment for you as the 
investor and benefits for 
the local industry.
Source: www.toppr.com
Easy International 
Trade
Commonly, a country has 
its own import tariff, and 
this is one of the reasons 
why trading with it is quite 
difficult. 
Also, there are industries 
that usually require their 
presence in the 
international markets to 
ensure their sales and goals 
will be completely met. 
With FDI, all these will be 
made easier.
Source: www.toppr.com
Employment and 
Economic Boost
Foreign direct investment 
creates new jobs, as 
investors build new 
companies in the target 
country, create new 
opportunities. 
This leads to an increase in 
income and more buying 
power to the people, which 
in turn leads to an 
economic boost.
Source: www.toppr.com
Development of 
Human Capital 
Resources
One big advantage brought 
about by FDI is the 
development of human 
capital resources, which is 
also often understated as it 
is not immediately 
apparent. 
Human capital is the 
competence and 
knowledge of those able to 
perform labor, more known 
to us as the workforce.
Source: www.toppr.com
Tax Incentives
Parent enterprises would 
also provide foreign direct 
investment to get 
additional expertise, 
technology and products. 
As the foreign investor, you 
can receive tax incentives 
that will be highly useful in 
your selected field of 
business.
Source: www.toppr.com
Resource 
Transfer
Foreign direct investment 
will allow resource transfer 
and other exchanges of 
knowledge, where various 
countries are given access 
to new technologies and 
skills.
Source: www.toppr.com
Hindrance to 
Domestic 
Investment
As it focuses its resources 
elsewhere other than the 
investor’s home country, 
foreign direct investment 
can sometimes hinder 
domestic investment.
Source: www.toppr.com
Risk from 
Political Changes
Because political issues in 
other countries can 
instantly change, foreign 
direct investment is very 
risky. 
Plus, most of the risk 
factors that you are going 
to experience are 
extremely high.
Source: www.toppr.com
Negative Influence 
on Exchange Rates
Foreign direct investments 
can occasionally affect 
exchange rates to the 
advantage of one country 
and the detriment of 
another.
Source: www.toppr.com
Higher Costs
If you invest in some 
foreign countries, you 
might notice that it is more 
expensive than when you 
export goods. 
So, it is very imperative to 
prepare sufficient money to 
set up your operations.
Source: www.toppr.com