Table of ContentsIntroductionHow Governments Encourage FDIWhy Infrastructure Encourages FDIAdvantages of Foreign Direct InvestmentPotential Problems of Foreign Direct InvestmentInvestments foreign direct investment in developing countriesMalaysia as a case studyConclusionIntroductionBy definition, foreign investment involves an external or foreign entity that invests or purchases the goods of a local economy. It's foreign money that comes from another country. In other words, foreign direct investment (FDI) refers to an interest in or acquisition of foreign assets with the aim of controlling and supervising them. Organizations can carry out FDI in a variety of ways, including purchasing the benefits of an outside organization; invest resources in the organization or in new properties, plants or equipment; or participate in a joint venture with a distant organization, which normally includes speculation on capital or capabilities. On the other hand, infrastructure can be defined as the basic physical and organizational structures and facilities of a country. The purpose of this article is to discuss the role of a country's infrastructure in encouraging foreign direct investment in developing countries and Malaysia as a case study. In my opinion, a country's infrastructure plays an important role in encouraging FDI and, on some points, I would like to explain why. Say no to plagiarism. Get a tailor-made essay on “Why Violent Video Games Should Not Be Banned”? Get the original essay How Governments Encourage FDIGovernments seek to encourage FDI when they are concerned with developing their national economy and attracting new technology, business know-how and capital to their nation. On these occasions, many governments still attempt to manage and control the type, quantity and even nationality of FDI to achieve their national, monetary, political and social objectives. Financial incentives: Host countries offer organizations a mix of tax incentives. and loans to invest in. Home country governments may also offer a combination of insurance, loans and tax breaks with the end goal of promoting their organizations' supervised investments. The initial case of China in Africa illustrates this type of motivating forces. Infrastructure (primary focus of this research): Host governments improve or upgrade local infrastructure – in energy, transportation and communications – to encourage explicit businesses to contribute. This also serves to improve local conditions for domestic businesses. Administrative procedures and regulatory environment: Host country governments facilitate the creation or creation of jobs in their country. By reducing administration and administrative requirements, these countries appear more and more attractive for remote businesses. Invest in education: Countries are trying to improve their workforce through education and job preparation. An informed and talented workforce is an important rule of speculation for some global organizations. Political, economic and legal stability: host country governments try to promise organizations that working conditions in the neighborhood are stable, simple (i.e. strategies are clearly expressed and in the open area), and it is unlikely to change. Why infrastructureencourage FDI The major contribution of FDI to the economic progress of a nation has been well recognized in the literature. FDI plays an important role in the economy as it stimulates economic growth by increasing domestic capital formation and facilitates the transfer of new technologies. Among the immense literature on FDI, few researchers have recognized the importance of infrastructure as well as other determinants in encouraging FDI. These researchers argue that investors look for markets in which they can obtain the maximum benefits and reduce production costs. They showed that this objective can be achieved if the infrastructure is in good condition and supports investors. Usually, a country with good physical infrastructure such as highways, ports, bridges and communications, etc., will most likely attract more FDI. Coughlin et al. (1991) in their research, analyzed the factors affecting FDI flows in the United States for a period from 1981 to 1983. They found that more extensive transportation infrastructure was associated with a high level of FDI. Wheeler and Mody (1992) also found in their study that the quality of infrastructure is an important factor for developing countries trying to attract FDI from the United States; on the contrary, it is less crucial for developed countries that already have a large amount of infrastructure. Benefits of Foreign Direct Investment Capital inflows generate higher production and employment. Capital inflows can help finance a current account deficit. than short-term portfolio entries. The recipient nation can benefit from the improved knowledge and capabilities of foreign multinationals. Foreign investment could lead to higher wages and better working conditions. Potential problems with foreign direct investment give multinationals control rights in foreign countries. Critics argue that powerful multinational corporations can use their financial influence to influence local politics to obtain favorable laws and regulations. IDE can be a convenient way to circumvent local environmental laws. Developing countries may be tempted to compete by reducing environmental regulations to attract needed FDI. FDI does not always benefit recipient countries, as it allows foreign multinationals to profit from ownership of raw materials, with little evidence of wealth distribution across society. have been criticized for poor working conditions in foreign factories (e.g. Apple factories in China).Foreign direct investment in developing countriesForeign direct investment has grown steadily over the past decades. The development of FDI accelerated during the 1990s, reaching $331 billion in 1995 and $1.3 trillion in 2000 (UNCTAD, 2002). Subsequently, developing countries experienced a sharp increase in the average ratio of FDI to investment during the 1990s. One of the main components of FDI developments was the increase in foreign investment in the administration sector, which currently constitutes the predominant share of global FDI. For developing countries, FDI in the services sector grew at an annual rate of 28 percent between 1988 and 1999, and in 1999 it accounted for 37 percent of all foreign speculation flows. A significant part of the increase in foreign investment in the services sector The sector..