FDI’s Role in Emerging Economies

Abstract

This paper reviews the role of foreign direct investments in emerging market economies. The paper also exposes the merits and demerits of FDIs in emerging economies in order to understand the inflow and outflow of FDIs around the world and exhibit the global trend of FDIs. Many multinational firms have invested in emerging economies due to their attractive geographical location and cost minimizing factors including low wages, large market and growth opportunity. China, India and Brazil are the most attractive location for FDIs inflow in the world due to these factors. Some of the factors that discourage the foreign investors from investing in any country are the adverse law and order situation and lack of infrastructure. All those emerging economies that have no political and terrorism issues are flourishing because they have been able to attract major chunk of FDI which is playing vital role in strengthening economy due to capital inflows and currency appreciation. The paper conclude that FDIs have significant impact on the economies of different countries although there are certain unfavorable impacts of FDIs in the emerging economies but all in all the positive impacts are far more beneficial than the negative ones.

Keywords: FDI, Emerging Economies, Economic prosperity, BRIC,