THE IMPORTANCE OF FDI IN ECONOMIC DEVELOPMENT

A. Rybak

Lazarski University, Warsaw, Poland

Foreign Direct Investment (FDI), being a major source of capital for a wide range of national economies, plays an extremely significant role in international economic relations. It is of great importance for any state’s economy due to the international division of labor, the development of international relations, and, as a result, international economic integration.

Nowadays, at the current stage of the world economy’s development in the context of increasing globalization, liberalization and competition, the vast majority of countries stimulates FDI inflows, and governments increase their role in this field by developing a variety of mechanisms to attract foreign capital [2].

Foreign direct investment is a useful tool for economic development, impacts of which are described as follows [1, 3]: stimulates the growth of countries’ competitiveness; provides host countries with capital and new technologies; improves the competitiveness of domestic production; increases the employment rate by creating new working places; improves political relations between states; and creates direct, stable, and long-lasting links between economies.

In addition to this, a chance to become more actively involved in international business activities is given by FDI to small and medium-sized companies. Thus, foreign direct investment helps states to enhance their economic development.

It can be concluded that developing countries are in extremely urgent need for foreign direct investment inflow as without FDI such states face many obstacles to provide a continuous, self-sustaining economic growth and to integrate into the world economy. There is no doubt that the inflow of FDI has a positive impact on economic development.

Bibliography

1. Mansbach, R. W., and Rafferty, K. L., 2008. Introduction to Global Politics. New York: Routledge, pp. 609-610.

2. Misakyan, M. N., 2004. ‘Mobilization of Foreign Direct Investment into Economies in Transition (on the basis of Central and Eastern Europe)’. Herald of SPbSU, vol. 5, no. 4. Saint Petersburg: SPbSU.

3. Sharma, S., 2012. ‘Role of Foreign Direct Investment in Inclusive Globalization’. International Journal of Social Sciences & Interdisciplinary Research, vol. 1, no. 3, viewed 3 December 2013, <http://www.indianresearchjournals.com/pdf/IJSSIR/2012/March/8.pdf >.