Foreign direct investment

FDI or foreign direct investment can be defined as the investment of a company

or an entity from a country to the company or the business of other country. In
other words, direct investment made by non-resident investors in the economy
of a country. It is the way of injection of foreign funds in to the enterprises of a
country. FDI not include investments in stock markets, rather than that it refers
specifically to the investment of foreign assets into domestic goods and
services.

Importance
It is a major source of external finance by which countries with limited capital
can receive finance from wealthier countries. This involves the transfer of factors
to compliment capital including management, organizational skills, technology
and strategic skills. As an inflow of capital in, changes the balance of payments
which helps in improving the foreign reserves.

Advantages

Access of foreign markets- a wide range of customer for the products.

Access of resources, for example- Natural, Human and also Financial
resources.
Reducing the cost of production of a product by implementation of new
technology or by operating production unit in a nation with cheap wage
labour.

Disadvantages

This is risky as the political issues in many countries can be changed

instantly.

Investing in other nations sometimes is costly then the goods exportation.

In some cases, the political changes in a country will lead to the scenario
where the government will control assets and property .