8 Problems facing foreign direct investments in developing   countries

8 Problems facing foreign direct investments in developing   countries

  1. Unfavorable government  policies in form  of high  taxes,  low  taxes  on imports,  high  interest  rates on loans etc. This discourages   foreign direct investments.
  2. High levels of economic instabilities.  For example   inflation,   exchange   rate   fluctuations    etc. Inflation increases the costs of production   and discourages   exports hence limiting   foreign direct investments.
  3. Low levels of technology   in  developing  countries.  There   is existence    poor   technology    in developing    countries    and   it is expensive   to import   modem    techniques    of production     from developed countries.  This increases the cost of production   for the foreign investors.
  4. Poor and inadequate infrastructural facilities.  This is reflected   in form poor transport   network, insufficient    power    supply,    unreliable    telecommunication      network    and   limited    financial institutions.  This makes it difficult to produce and market the produced   goods and services by the foreign investors.
  5. Limited skilled manpower in developing countries.  Labour   in developing   countries   lacks   the necessary skills required   to operate the sophisticated   equipments.   Foreign investors   are forced to import skilled manpower   from abroad which is expensive.
  6. Limited markets in developing countries. This is due to low aggregate   demand   resulting   from high levels of poverty in developing   countries.
  7. High levels of political instability in developing countries.   This scares away the potential   foreign investors from setting up meaningful   businesses due to fear of losing life and property.
  8. Inadequate supply of raw materials required   in the production   of goods and services.   Most of the raw materials and capital goods are imported from other countries.  This increases   the costs of production hence limiting production   by foreign investors.
CATEGORIES
TAGS
Share This

COMMENTS

Wordpress (0)
Disqus ( )