During the 1990s, foreign direct investment was very much encouraged across the country to improve the status in every sphere, as perceived by the government. To alleviate the economic hardships, foreign direct investment was greatly useful in those days and our government was trying hardest to bring as much direct investment as possible into the country.
There are some examples of such investments done in the East Asian countries.
In 1997, where there was a financial crunch in the whole country, the foreign direct investment was noticed flowing in a steady pace whereas, the other forms of cash flow were seen declining. There were countries with similar setbacks around the same time in Latin America and Mexico.
For the host countries, by encouraging such investments from other countries, the economic conditions started improving and many thousands of jobs were created. Technical knowledge was exchanged between countries which created even more employment opportunities across nations. In today’s world, FDI is being used as a tool to gain entry for investors rather than an investment strategy.
In spite of a significant decline in the trade barriers, FDI is seen to be picking up speed in countries that are in dire need of funds and are perceived as potential locations for business. With globalization, the barriers across the world are getting lifted and companies see the world economy as their market. Another major advantage of FDI is reduction of cost through the realization of scale economies. Moreover, any technological know-how will be shared between different countries which will definitely ameliorate economies.
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