8 Problems facing foreign direct investments in developing countries
- Unfavorable government policies in form of high taxes, low taxes on imports, high interest rates on loans etc. This discourages foreign direct investments.
- 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.
- 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.
- 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.
- 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.
- Limited markets in developing countries. This is due to low aggregate demand resulting from high levels of poverty in developing countries.
- 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.
- 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 Economics
TAGS Dr. Bbosa Science
