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| Foregin Direct Investment (FDI) |
International capital flows where a company of a country set up or expand their businessoperations in other countries. Most traits of foreign capital investment is not only involveresources, but impose a control (control). Foreign investment was identified by Robert Gilpinnamely multinational or transnational that do direct investment or equity assets in foreigncountries by means of setting up a subsidiary. Gilpin review it there are two related things i.e.the country of origin (home country) and the host country (the host country).
FDI can be distinguished on the basis of motivation which aspects influenced foreign investors, namely
1. Efficiency seeking investments which the company is trying to increase efficiency by taking advantage of economic scale and scope. This type of FDI implemented in developing countries
2. Resource seeking investments is to look for a more efficient production factors in other countries compared to the use of production factors in the country rated more costly
3. Marketing is seeking investments made with the purpose of looking for a new market or maintain the old market. Investment with this background aims to find its realization in the form of realizable market mergers and acquisitions
There are 2 types of FDI that is vertical and horizontal:
1. vertical FDI is the geographical relationship with FDI linkages cross country. the company will conduct production in countries with cheap labour costs or low, the source of the abundant raw materials, then the result of the production activity conducted in the country will be transmittedback to the parent country.
2. horizontal FDI FDI is producing the same type of goods in some countries. This type of FDImotivated to seek out new markets. Its advantages include efficiency in transportation costs, because the operation is viewed more closely to the market and consumers.
The positive impact of FDI
1. The existence of a transfer of technology and managerial expertise
2. Knowledge of new production technology as well as access to international networks
3. As a source of funding for development, especially for developing countries
4. The increase of production and national income target countries
5. As a source of pembiyaan and the formation of long term capital
6. Foreign-direct investment will not burden the balance of payment due to the absence of an obligation to pay the debt and interest
7. Encourages regional development and sekroral
8. increase the soul of entrepreneurship and healthy competition within the country
9. Open jobs
The potential negative impact of FDI
1. The emergence of industrial dominance, which potentially deadly industry in ngeriyang lost in terms of capital one
2. Reliance technology
3. Cultural change
4. Could potentially interfere with the planning of the economy
5. Can intervention against the home government by MNC
6. Return potentially run out of the country. It depends on the policy of the Government to regulate the turnover in the country
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