Reasons for interest in FDI

Interest in FDI is attributed to the following reasons.The first is the rapid growth in global direct investment and the change in its pattern, particularly since the 1980s.These developments have motivated attempts to come up with theories and hypotheses that explain the phenomenon of FDI.The second reason is the concern it raises about the causes and consequences of foreign ownership.The views on this issue are diverse: at one extreme, FDI is regarded as symbolizing new colonialism; at the other, it is viewed as something without which the host economy cannot survive.The third reason is the possibility offered by FDI for channeling resources to developing countries.Thus, FDI is becoming an important source of funds at a time when access to other means of financing is dwindling, particularly in the aftermath of the international debt problem.Finally, FDI is thought to play a potentially vital role in the transformation of state planned economies.This is because FDI complements domestic saving and contributes to total investment in the economy.It is also because FDI brings with it advanced technology, management skills and access to export markets.