Demand and Supply for Housing

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Factors Affecting Foreign Direct Investment

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Introduction

• Foreign direct investment is one of the most
  essential tools for growing the economy of a
  country.
• There are so many countries that struggle to
  attract foreign investors .
• This is because of the important roles that they
  play in building the economy.

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Reasons Why Foreign Direct Investment is Important

• It can provide substitute products and increase
  supply of top products in a country through
  imports.
• It creates employment for the locals
• Enhances development of local infrastructure
• It enables locals to access products that are not
  produced within the country.
• There are a number of factors that affect foreign
  direct investment in different countries. These
  include

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Government regulations and policies on investment

• Policies determine the amount of foreign direct
  investment that a country receives.
• Policies that favor the local investors more than
  the foreign investors can discourage foreign
  direct investment within its markets.
• Tax regulations can also encourage or discourage
  foreign investors.
• Double taxation for instance often reduces the
  number of foreign investors in a country.

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Availability of raw materials and trade
facilitation instruments

• Raw materials attract more investors into the
  country.
• A country endowed with raw materials helps
  investors reduce costs of production.
• This is one of the reasons why many investors
  have recently flocked in African countries.
• FDI is also affected by availability of trade
  facilitation instruments such as proper
  infrastructure.

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Availability of Appropriate Human Resources

• The human resources in a country can determine
  whether or not investors flock the country.
• High numbers of skilled and educated personnel
  available are key.
• They will attract companies in need of skilled
  human resources.
• Companies which are more labor intensive will
  often flood poor countries with high populations.
• This is because of the vast availability of
  cheap labor.

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Economic Growth of a Country

• A country that progresses economically tends to
  attract more foreign direct investment .
• This is because economic growth boosts investor
  confidence.
• Countries with high rates of economic growth also
  tend to have many consumers .
• Consumers have economic muscle and can thus
  afford to purchase manufactured goods.
• The opposite is true for countries undergoing
  recession.
• This reduces spending amongst consumers.

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Political Stability and Security of a Country

• This also determine the amount of foreign direct
  investment that a country attracts.
• This provides secure systems and environments for
  more foreign investors.
• Insecurity issues and political instability
  attract fewer investors in a country.

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Cost and Ease of Doing Business

• The cost of production is a very important factor
  in attracting foreign direct investment.
• The ease of starting and running a business is
  important.
• It will influence the decisions of foreign
  investors to venture into specific foreign
  markets.
• The Ease of Doing Business Index is normally used
  to rank the ability of countries to facilitate
  and expedite opportunities for the investors.

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