Do FDI contribute to receiving country’s development?

Development in the world consist not only of growth but also of that how this growth is being distributed. The growth will not bring such benefits as it could if growth means increasing inequality. The world is still divided into developed, developing and least developed. The gap is amazing. Pearson education announced that: “In 2005, the poorest 40% of the world population accounted for 5% of global income. The richest 20% accounted for 75% of world income, and the richest 10% accounted for 54%.“ The inequality is amazing.
One of the ways to share the experience which has the developed world could be through FDI. However, there exist many views regarding the likely impact on FDI receiving country. The main policy question is then whether FDI should be welcomed or local authorities should pose restrictions on foreigners coming to do business in their countries.
Two approaches exist: Neo-liberal and Keynesian. Neo-liberals emphasize more on how FDI contributes to economic growth in receiving country while advocates of Keynesian approach state that sometimes FDI do not bring all the promised benefits and may be even harmful for home economy. This implies that policy regarding FDI has to be restrictive in some cases in order to ensure host country’s development.
Neo-liberals would have a number of arguments defending FDI and explaining how they are beneficial for developing country and how it contributes to development. Firstly, FDI has an advantage over other investments such as portfolio or loans. Quarterly magazine of IMF Finance & Development claims that FDI proved to be much more resilient during the crisis. During financial crisis of 1997-98 it was stable compared with other types of investment especially short-term which were subject to large reversals. The same was apparent during Mexico crisis and Latin American debt crisis of 1980.
Neo-liberal economists advocate free flow...

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