Question

All countries around the world, rich or poor, compete to attract foreign direct investments. Let assume that you are an expert in foreign direct investment. A foreign leader hires you to help his/her country to attract FDIs. You did an assessment of the competitiveness of the country and found that three major problems (factors) should be addressed to improve the country's competitiveness to attract FDIs. What are these factors? Explain them. How do you advise the government to address them?

Answer 1

Foreign Direct investment plays a Vital role in the economic development of a country. All the country wants to attract FDI to stabilize their ecomony, to increase their geographical location and every company wants to engage with FDI to reduce their cost of production. Various factors are needed by the country to attract Foreign Direct Investment.

After analysing the given country's competitive environment, there are three major factors lacking in the country to attrat FDI . These factors are :-

1. Infrastructure: The level of infrastructure needs to be high to attract FDI which is lacking in this country. With more level of infrastructure, more investors from the various countries wii be attracted to invest.

2. Exchange Rate Stability : Foreign Direct Investment is based on exchange rate but this country does not have stability in their exchange rate. The key for investment is based on rate fator that is the reason it is essential.

3. Labour Skills : According to my research, FDI needs higher skilled labours which is lacking in this country. This factor is essential for the business in which they invest to produce quality products.

Advice to address them.:

1. For infrastructure, the government must address the problem by taking some measures like development of highways, expansion of ports to increase exports and imports. These measures would definitely attract FDI.

2. For maintaining the stability in exchange rate, the government must frame various policies so that the value of domestic currency does not drops otherwise FDI would lose heavily.

3. The government must employ skilled labours from across the country to increase the level 9f productivity and attract investors.

By doing such measures, the country would definitely attract the FDI for economic growth