Foreign Direct Investment
The prime reason behind this is the globalization. The diversified global market has emerged as a lucrative option for investment. In such a situation, inflow of foreign funds is quite natural. In the past the foreign direct investment were limited to the highly industrialized countries and the developing countries were not preferred by the foreign giants.
But at present, the trend has changed totally and the developing economies are preferred highly for foreign direct investment. There are several reasons for this.
- Availability of raw material
- Availability of cheap labor
- Cheap production Cost
- Ready market
- Legal facilities in such countries
On the other hand, the developing countries are also getting some facilities from foreign direct investment. Foreign aid proves to be of great use for the infrastructural development of the developing countries. These initiatives are also providing ample scope of employment, which is the major problem in all developing nations.
The scenario of FDI (Foreign direct investment) was totally different in 1970's. At that time, the developing countries were out of the picture. But the picture has totally changed in 1990s. It was because the countries followed the method of privatization. More than 71% of the total foreign direct investment in 1997 which was forwarded towards the developing countries, was shared by nine countries. China alone received 30% from the above mentioned FDI.
The main countries or continent, which are highly benefited by the FDI in the recent years are:
- Latin America
- North America
- Parts of Europe
Many countries became independent in the post-war period and these countries were not ready to accept any type of foreign investment any more. For the reason, the concept of nationalization dominated the period. But gradually these countries understood that the obligations on the respective governments were becoming too much. So, the privatization concept was again adopted by these countries and this initiative allowed the FDI boom. This boom has not only caused the economic development in those countries, but also helped in technological advancement and employment.