What are the Benefits and Advantages of Foreign Direct Investments (FDI)?


The economies of the countries over the years have become macroeconomic systems which are interdependent, since the close relationship between multinational companies and the markets of developing countries represent a symbiosis which is fundamental for the development of the world economy. In a globalized market, these transnationals dictate in many ways the lifestyles and economic quality of many parts of the world.

This is because when a company decides to make an investment, it has to present different financial statements to the government of the host country, which have different advantages and disadvantages. When the company shows its Financial State, it has to respond monetarily for everything that the company represents including the taxes that are credited to it for being a foreign company.

These multinational companies always are motivated to respond in the best way to the markets and offer the best products that they can receive. For this, in the international market, there are different types of distinctions to which a company can aspire.

Among these are the ISO 9000 standards, which are issued by a quality control committee of the International Organization for Standardization. These have a number of steps to implement these rules.

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A basic rule of the ISO 9000 standards is that the manager of the company must know how to prepare an audit, which is key in the process of demonstrating how reliable the company is to the market.

These ISO 9000 standards also have many benefits and features, as well as a series of objectives which serve to encourage companies to generate better products to improve the quality of life of both its employees and its customers.

Sometimes developing countries need economic incentives which facilitate growth and the develop. Usually, they do this by allowing multinational companies to establish production bases in the regions that need it most.

This is because the labor of people in developing countries is cheap and easy to pay in both cash and social security benefits for these large companies.

The main advantages that come with this for companies is that they do not have to pay as many import and export taxesHowever, governments usually make subsidies with these companies to be able to generate a profit for both. For example, there are companies that provide their services to the governments of the countries where they are in exchange for reductions when paying taxes.

By bypassing all economic restrictions in the countries that host the company, these have unlimited access to the market and therefore they can position their product against other national companies.

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When these companies start production, they open factories whose dimensions never have precedent in developing countries, which allows the country to have a positive technological change, since the government allowed a company to introduce cutting-edge technology to the market, either with the product itself or with the method used when producing it.

Also, when these large companies open doors in developing countries, employees end up very benefited. This is because companies make sure to invest well in social security plans for their employees.

In addition to the presence of a stable source of work allows the economic development of families of employees, achieving an improvement in the quality of life of the population of the town where the company’s headquarters are located.

However, not everything is perfect and with FDI’s come certain key disadvantages. One of these is the monopoly that these large companies can represent for all national companies smaller than these.

This is because as they are such large companies, They overshadow the opportunity to enter the market of several regional companies. Likewise, a very clear disadvantage is the economic adversities left by these companies when they have to close their doors.

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