In: Finance
The reasons, implications and process for FDI and possible problems (agency problem, etc..) to consider in conducting FDI
Foreign Direct investment is the investment made by a company in a foreign country. The reasons for FDI can include expansion in to foreign countries, cheaper cost of production or providing services in the other country ,avail tariff benefits in developing countries etc. Implications of FDI can include influx of foreign currency in the country where funds are put in, aids in developing technology, improves financial resources, accelerates the growth of economy, generates employment and helps in diversification for business houses. The process for an FDI includes choosing a potential country to invest, understanding the rules and regulations of that country to do an FDI, the method of an FDI either through a company, partnership or stake in a existing business. Possible problems cultural differences, rigid government regulations and possible chances of corruption, tax issues, political instability, exchange rate volatility and infrastructure of the foreign country.