Examine the role of foreign capital in the economic development of your country.

Positive role of foreign capital

• It increases the flow of capital stock which helpful in breaking the vicious circle of poverty.
• It supplements domestic savings
• It is a source of capital for financing social overheads (SOC) or infrastructure and directly improve agricultural sector or industry
• In form of foreign investment, it is accompanied by inflow of skilled manpower and advanced technology that improves the quality of goods and services.
• It reduces unemployment through job creation
• It increases government revenues through taxes.
• Foreigners invest in exports increasing foreign exchange incomes
• Foreign investors encourage similar investments by local investors.
• Foreign investors lend money to the government by buying securities
• It increased cooperation among countries; the origin foreign investor and the receiving country.
• Foreign investors increase aggregate demand for consumer goods and services such as telephone, water and electricity.
• Foreign investors may give donation under privileged people such as disabled people.

The demerits of foreign capital

• Foreigners repatriate their profits reducing further investments
• Foreigners concentrate in urban areas leading to increased rural-urban gap
• Foreign investors may not be easily controlled by the government.
• Foreign investment use capital intensive production techniques leading to limited job creation.
• There is limited implementation of economic programs as it has unfavorable strings attached.
• It discourages domestic savings since government depend on the foreign capital
• It increases the degree of dependence to foreign investment/countries