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Host Country Effects: Benefits

There are three main benefits of inward FDI for a host country: the resource-transfer effect, the employment effect, and the balance of payments effect.

Resource transfer effects: Foreign direct investment can make a positive contribution to the host country’s economy by supplying capital, technology, and management resources that would otherwise not be available. If such factors are scarce in a country, the FDI may boost that country’s economic growth rate. Many of the MNEs by virtue of their size and financial strength, have access to financial resources not available in the host country firms. These funds may be available from internal company resources, or, because of their reputation, large MNEs may find it easier to borrow money from the capital markets than host country firm would.

Employment Effects: The beneficial employment effect claimed for FDI is that it brings jobs to the host countries that would otherwise not be created there. Direct effects arise when a foreign MNE directly employs host country’s citizen

Balance of Payment: The effect FDI has on a country’s balance of payment accounts is an important policy issue for most host countries. A country’s balance of payment accounts keeps track of both its payment to and its receipt from other countries. Governments normally are concerned when their country is running a deficit on the current account of their balance of payments. The current account tracks the export and imports of goods and services. A current account deficit, or trade deficit as it is often called, arises when a country is importing more goods and services than it is exporting. Governments typically prefer to see a current account surplus than a deficit. The only way in which a current account deficit can be supported in the long run is by selling assets to foreigners. For instance, the persistent US current account deficit of the 1980s and 1990s was financed by a steady sale of US assets (stocks, bonds, real estate, and the whole corporations) to foreigners. Because national governments dislike seeing the assets of their country fall into foreign hands, they prefer a current account surplus. FDI can help a country achieve this goal in two ways.

(1) FDI is a substitute for imports of goods and services, it improves the current account of the host’s countries/balance of payments. Much of the FDI by Japanese automobile companies in the US and UK,  for instance, substitutes fore imports from Japan. Thus, the本论文由英语论文网提供整理，提供论文代写，英语论文代写，代写论文，代写英语论文，代写留学生论文，代写英文论文，留学生论文代写相关核心关键词搜索。