What Are The Advantages And Disadvantages Of Foreign Direct Investment?

This is a very subjective question. It will depend on the country that is being invested in, the industry where the investment is being made, the firm that is making the investment and amount of investment that is being made.

The pros of foreign direct investment are the flow of cash into the country. It will obviously stimulate economic activity in the country. Employment numbers will go up. Existing domestic producers will have to pull up their socks due to the onset of high quality competition. The international community will sit up and take notice. The Government will be taken seriously in the international summits because the number of stakeholders in the country has increased.

The cons of foreign direct investment are most visible in cases where the industry could have national secrets. The defense sector could be at risk if it allows FDI. Foreign policies may be enforced that do not go down well with domestic employees.

The advantages of the Foreign Direct Investments are that the majority victorious domestic companies, particularly those with only one of its kind compensation, spend abroad. The second advantage to be considered to be is the direct investment that makes companies more victorious internally. Companies with Foreign investment generally tend to be most profitable as well as it is to have a more stable sales and earnings.
The disadvantages of foreign direct investments are cost of travel and communications abroad. It also does not very much relate to local business tax laws, business atmosphere in particular and other government regulations. Another disadvantage could be the language and culture differences.

FDI is the investment of the firm directly in the foreign market and there is a complete development of facilities and production facilities. There are some pros and cons which are as follows:

ADVANTAGES

• Employment opportunities in foreign market are increased
  
• In the long run the aggregate supply shift outward
• It also makes the incentive for the domestic producers
• Government income is also increased
  

DISADVANTAGES

• Inflation is increased
• Local market is affected badly
  

Foreign direct investment is known to be both expensive and risky compared with either exporting or licensing. It is expensive because the firm is literally starting from scratch to build a new enterprise in a foreign country, unless of course it has bought a going concern.

FDI can take place via multinational enterprises. Among the more positive attributes are that MNEs can provide are knowledge, capital, technology, expertise, global affiliations, contributions to national productivity and exports, innovation, employment, and societal change.

Among the negative attributes, are that the MNE is perceived as a threat to national sovereignty, have unfair advantages over local competition, exploit government incentives at the expense of taxpayers, limit knowledge transfer to developing nations, exploit critical national and natural resources, and move on when their exploitation is finished.

Advantage of foreign direct investment is flow of funds in our country, and available the funds for corporates through Foreign direct investment , it developed  country  growth sign in global level , if we depend totally on Foreign direct investment, it impact shown our financial system negatively , Foreign direct investor main aim to earn profit  from our market, if any uncertainty in the market , if Foreign direct investor taken there entire investment from  our market then our financial system was collapsed. That is the example of u.s sub-prime crisis impact on Indian  financial system and stock market even our Indian financial system healthiest because of disadvantage of Foreign direct investment.