Foreign Direct Investment: Benefits and Consequences for Developing Countries

The video explores foreign direct investment (FDI) as a market-oriented strategy, focusing on its impact on developing countries. It discusses the types of FDI, such as Greenfield investments and mergers, and highlights trends in FDI flows. The video examines why multinational corporations invest in developing countries, citing natural resources and lower costs. It outlines the advantages of FDI, including job creation and technology transfer, while also addressing potential disadvantages like MNC dominance and environmental concerns. The video concludes by emphasizing the dual benefits for companies and host countries.

What is a Greenfield Investment in the context of FDI?

• Providing loans to foreign governments

• Investing in the stock market of a foreign country

• Building new facilities in a foreign country

• Acquiring a local firm in a foreign country

How did global FDI flows change after the financial crisis?

• They remained stable

• They began to recover

• They continued to decline

• They increased exponentially

What is one reason multinational corporations are attracted to invest in developing countries?

• High corporate taxes

• Abundance of natural resources

• Strict environmental regulations

• High labor costs

Which of the following is a benefit of FDI for developing countries?

• Decreased tax revenue

• Reduced foreign exchange reserves

• Higher levels of technology

• Increased unemployment

How can FDI help fill the savings gap in developing countries?

• By reducing government spending

• By increasing domestic savings

• By providing foreign loans

• By bringing in external investment

What is a potential disadvantage of relying heavily on FDI?

• Stronger local government control

• Increased cultural influence of MNCs

• Higher domestic savings

• Improved environmental conditions

Why might FDI not always lead to high tax revenue for host countries?

• MNCs often reinvest all profits locally

• Host countries impose high taxes on MNCs

• MNCs do not generate significant profits

• MNCs may repatriate profits to low-tax countries