Question 1

a) Importance of Foreign Direct Investment Foreign Direct Investment (FDI) is a measure of foreign ownership of productive assets, such as factories, mines and land. FDI is an integral part of an open and effective international economic system and a major catalyst to development. FDI provides major source of capital which brings with it up-to-date technology, provides employment and allows access to goods and services. It is cost efficient to have a foreign company investing in the country with a better technology as it will help in the home countrys economy growth (Loungani & Razin, 2001). After learning the cost and benefit of the technology, home country can pursue to buy over the technology. Moreover, employments is created and introduced to the world economy which helps the poor country citizen to be employed and the cost of labor is comparatively cheaper (Lipscy, 1991). Lastly FDI may bring new goods and services, allowing the receiving country to access these with the benefit of the local consumers (Dorucci, 2003).

Reference List
Dorucci, E. (2003). Capital Flows and Emerging Market economics. International Capital market . Lipscy, R. (1991). The Role of FDI in International Capital Flows. International Capital Flows . Loungani, P., & Razin, A. (2001). How Beneficial is Foreign Direct Investment for Developing Countries . Finance Development , 88 (2).