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1. Factors Affecting Foreign
Direct Investment
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2. 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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3. 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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4. 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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5. 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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6. 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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7. 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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8. 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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9. 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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10. Get More Information About
Factors Affecting Foreign
Direct Investment
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