31. FDI and economic development Flashcards
1
Q
Define FDI
A
FDI - long term investment by private MNCs in countries overseas
2
Q
Whate are the ways of giving FDI?
A
- MNC builds new plant in a country overseas / expands existing facilities into foreign countries
- MNC merges / acquires existing firms overseas
3
Q
Reasons why MNCs are attracted to developing countries
A
- rich in natural resources
- have potential to become huge markets
- lower cost of labour
- government regulations are less severe
4
Q
Evaluate FDI
A
ADVANTAGES:
- FDI helps with savings - leads to growth
- MNCs will provide employment also education, training
- allow greater access to research, development, technology
- higher tax revenue
- if local companies are bought - injection of capital flow
- MNCs can prvodie infrastructure
- provide higher choice for consumers
- leads more efficient allocation fo world’s resources
DISADVANTAGES:
- workers might be exploited - bad working conditions, minimum wage, child labour
- MNCs can gain too much power
- increase pollution - MNCs situate where the laws are not strict
- contribute to resource depletion
- when purchasing a local company, previous owners are paid in shares - might never get the money
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