We are living in a time where world trade is and globalization are rapidly increasing. Because of this, Foreign Direct Investment has also become an increasingly popular way of doing business. Foreign Direct Investment (FDI) can occurs two ways. a.) When foreign firms acquire a substantial ownership position in a domestic firm. or b.) when foreign firms locate production plants in the domestic economy. There are many reasons why firms decide to invest in foreign countries; one such reason would be better access to cheaper means to produce their products. Entities, which are involved in Foreign Direct Investment, are, Multi National Corporations, host countries, and their governments, etc. Each of these entities are affected as well as have an effect on FDI’s. This paper begins with an overview of FDI and the policies in which it is involved. Next, the nature of multinational corporations will be outlined, along with a description of recent trends in FDI flows. It will then move on to discuss the costs and benefits of Foreign Direct Investments, from the host country’s point of view. Following will be the host countries’ policies toward multinational companies, and the effects of those policies will also be discussed.This paper begins with a general overview of the topic of Foreign Direct Investments, economies that it effects and some ideas which have been discussed and are still being developed. One such requirement for economic development in a low-income economy is an increase in the nation's capital. A developing nation may increase the amount of capital in the economy by encouraging foreign direct investment. Many developing economies have attempted to restrict foreign direct investment because of nationalist sentiment and concerns about foreign economic and political influence. One reason for this sentiment is that many developing countries have operated as colonies of more developed economies. This ...
