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1: 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 2: 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.

3: The Advantages and Disadvantages of FDI for the MNE:

- More costly travel/communications abroad. - Not having a close familiarity with local Business tax laws, business scene in general, and various government regulations. - The MNEs face risks such as exchange rate Changes, expropriation by the government, and other actions that can be taken against them. - Language and culture differences - Higher wages/benefits must be paid to the personnel going abroad.

- Jumping the tariff wall (and other non- tariff barriers) - Securing access to minerals located in the host country - Lower wage in host developing countries for Abort. - Protection of market shares in exports if MNE's competitors also have established plants in the area. (Advantage) Raising the Level of Investment Up gradation of Technology Improvement in Export Competitiveness Employment Generation Benefits to Consumers Resilience Factor Revenue to Government

Disadvantages FDI is not an unmixed blessing. Governments in developing countries have to be very careful while deciding the magnitude, pattern and conditions of private foreign investment. Possible adverse implications of foreign investment are the following: 1. When foreign investment is competitive with home investment, profits in domestic industries fall, leading to fall in domestic savings. 2. Contribution of foreign firms to public revenue through corporate taxes is comparatively less because of liberal tax concessions, investment allowances, disguised public subsidies and tariff protection provided byte host government. 3. Foreign firms reinforce dualistic socio-economic structure and increase income inequalities. They create a small number of highly paid modern sector executives. They divert resources away from priority sectors to the manufacture of sophisticated products for the consumption of the local elite. As they are located in urban areas, they create imbalances between rural and urban opportunities, accelerating flow of rural population to urban areas. 4. Foreign firms stimulate inappropriate consumption patterns through excessive advertising and monopolistic market power. The products made by multinationals for the domestic market are not necessarily lowing price and high in quality. Their technology is generally capital-intensive which does not suit the needs of a labor-

surplus economy. 5. Foreign firms able to extract sizeable economic and political concessions from competing governments of developing countries. Consequently, private profits of these companies may exceed social benefits. 6. Continual outflow of profits is too large in many cases, putting pressure on foreign exchange reserves. Foreign investors are very particular about profit repatriation facilities.