Impact of Foreign Direct Investments on Sustainable Development of Developing Countries

Abstract

The Foreign Direct Investment means “cross border investment made by a resident in one economy in an enterprise in another economy, with the objective of establishing a lasting interest in the investee economy. FDI is also described as “investment into the business of a country by a company in another country”. Mostly the investment is into production by either buying a company in the target country or by expanding operations of an existing business in that country”. Such investments can take place for many reasons, including to take advantage of cheaper wages, special investment privileges (e.g. tax exemptions) offered by the country. The aim of this article is to formulate hypotheses about the impact of the foreign direct investment (FDI) on sustainable development indicators of developing countries with reference to the relevant scientific literature. A set of sustainable development indicators reflecting different facets of sustainability and sensitive to countries’ development level has been distinguished. The following indicators have been considered as relevant for inclusion into the set, which would be used for estimation of FDI impact on enhancing well-being in the developing countries: GDP, exports, inflation, population, ,total health expenditure per capita, total tax rate. As this article is focused for the long-term perspective of FDI impact on sustainable development, as we know that Investment is major factor for the growth of any economy. This article will look for the FDI multiplier effect on the Growth of Developing Economies.