Foreign Direct Investment and Its Impact on Economy and Ecological Essay

Foreign Direct Investment and Its Impact on Economy and Ecological Issues - Essay Example In addition to this, the review of this impact on economic state of affairs in developing countries also considers the negative and positive impacts of foreign direct investment. Apart from this, the report also discusses how foreign direct investment influences ecological and environmental issues and takes into consideration the particular kind(s) of foreign direct investment which gives rise to such ecological and environmental issues. Before going into details of these issues, it is pertinent to understand what foreign direct investment means (Fedderke and Romm; Chakraborty and Nunnenkamp). Foreign Direct Investment Foreign direct investment refers to the investment or investments made by a corporate entity or investment institution, which operates in one country, in another corporate entity or investment institution which operates or is based in another country. In other words, foreign direct investment is an investment which comes in a country from another country directly. It i s pertinent to distinguish between foreign direct investment and those investments which are indirect, as for instance, investments made by corporate entities from foreign countries in the equity of corporate entity or entities operating in the country. ... oreign direct investment has been regarded by a number of researchers in the past as having a positive impact on the economic development of countries, where such investment takes place. An instant evidence in this regard can be put forward as an example of Chinese economy; China has been reported by the United Nations as the largest receiver of foreign direct investment in the first 6 months period of previous year 2012. The total amount of foreign direct investment received by China in initial six months of year 2012 was $ 59.1 billion, which surpassed foreign direct investment received by United States in the same period by $ 1.7 billion. This information can be directly related with the unmatched economic development which has taken place in the past few decades in China (Reuters). Since after the end of World War 2, foreign direct investment has played an important role in generating significant amounts of financial support for the developing countries. However, the flow of fore ign direct investment halted after 1970 as there was an increase in the flow of investment from foreign countries in developing countries and the financial institutions particularly commercial lending institutions found their role as diminishing. However, after certain regulatory measures were taken by the bodies and respective authorities in the developing world, foreign direct investment was again allowed to gain momentum in the mid of 90s (Vo). Upon reviewing the theoretical propositions related to the impact of foreign direct investment on economic growth, it is found that there are differing views in this respect. According to the neo-liberal school of thought, foreign direct investment has a positive and direct relation with the economic development of a region. In light of this