Several studies indicate that home investment projects have more beneficial trickle-down results on local economies. The role of immediate foreign investment (FDI) in promoting growth and sustainable development hasn’t been substantiated. There is not even a decided description of the beast. Generally in most developing countries, other capital moves – such as remittances – are larger and more predictable than FDI and ODA (Official Development Assistance).
Several studies suggest that domestic investment projects have significantly more beneficial trickle-down effects on local economies. Be that as it can, close to two-thirds of FDI is among wealthy countries and in the form of mergers and acquisitions (M&A). All done and said, FDI constitutes a mere 2% of global GDP.
FDI will not automatically convert to net forex inflows. To begin with, many multinational and transnational “investors” borrow money locally at favorable interest rates and thus finance their projects. This constitutes unfair competition with local firms and crowds the domestic private sector out of the credit marketplaces, displacing its investments along the way. Many transnational companies are world-wide web consumers of savings, draining the local pool and departing other entrepreneurs high and dried out.
Foreign banks tend to collude in this reallocation of financial wherewithal by specifically providing to the needs of the less dangerous segments of the business scene (read: foreign investors). Additionally, the greater profitable the task, the smaller the net inflow of international funds. In some developing countries, revenue repatriated by multinationals go beyond total FDI. This untoward final result …