1. Foreign direct investment and economic development
IB Economics
Foreign direct investment and economic development

2. Foreign Direct Investment (FDI)
Long-term investment by private multinational corporations (MNCs) in countries overseas.
Build new plants or expand existing facilities in foreign countries
Merge with or buy existing firms in foreign countries

3. Developing economies 28.7%
- China 8.2%
- Africa 3.4%
US (most inflows) 15.3%
2008 data

4. MNCs are attracted to developing countries
Seeking natural resources
Growing markets, source for demand
Low labor costs
Few government regulations
Tax concessions

6. Advantages associated with FDI
Fill savings gap
Provide employment, education, training
Provide access to R&D, technology, marketing expertise
Multiplier on economy
Governmental tax revenue
Improve infrastructure
More choice, lower prices for consumers
Efficient allocation of resources

9. Disadvantages associated with FDI
Use own management, use only cheap labor, provide no education or training
Too powerful, so get tax advantages and subsidies
Transfer pricing (worksheet time!!!)
Take advantage of weak labor and pollution laws
Strip resources and leave
Use capital instead of appropriate technology involving labor-intensive production
Send profits home

10. Corporate Social Responsibility (CSR)
Policies regarding human rights, employee rights, environmental protection, sustainable development and community involvement

11. Ted Talks
Euvin Naidoo on investing in Africa (19:05)
Jacqueline Novogratz invests in Africa’s own solutions (12:56)