FDI has also led to displacement of most population in host countries. Cotula (2009, p. #) in the book Land Grab or Development Opportunity? tries to discuss how most people in African countries have been displaced to give way to foreign investors, who come to set up their firms in their local lands.
This interferes with their livelihood and may cause a decrease in their productivity. The host government usually agrees with the foreign investors and allows them to start their firms forcing the local people to vacate their native land. In some cases, these locals are given alternative land and in others, they are left to fend land for themselves without even being given compensation. Conflicts also arise in result of foreign direct investment. In many cases, it is the government that benefits from the finances acquired from foreign investors. Considering mining cases, the people from the local areas where the mining is carried out do not get a share of the income and in result, a conflict arises between the locals and the government, and, in some cases, the foreign investors are forced to abandon their endeavor (Huang 1997, p.
#). In Kenya, for example, a conflict has erupted involving the locals of Ngong localed in Nairobi, because the government signed a deal with a foreign firm to start a cement manufacturing factory without assessing the effects of this to the locals, who would be the ones to encounter the negative externalities. Such conflicts may derail processes or cause harm to individuals. Another disadvantage that foreign direct investment may cause or alleviate its level is the issue of land idleness. This is a situation whereby land is left without being used after the previous use has made it difficult or rendered it unfit for agricultural or any other specific use.
Some foreign investors in the process of developing infrastructure in te host country dig quarries and after completing their work leave the quarries open. Apart from rendering the piece of land useless, these quarries pose a threat to the safety of the locals as dangerous equipment in use may still be active. In addition to the above mentioned negative effects, foreign direct investment causes brain draining. In many cases, foreign firms take people from the country they settled to their home country to work for them (Boocock 2002, p. #).
The host country is, therefore, denied the chance to get the services of its own people. These people are usually taken to the foreign countries where they are better payed compared to what they could have been payed in their own country. The countries earnings are reduced significantly, and contracts are violated in these cases. A good relationship shared by the two countries may be at risk due to such actions.In conclusion, foreign direct investment can be regarded as basically one of the main ways through which a country gets its inflows.
Developing countries mostly rely on already developed countries to support their projects that require high asset and capital input. Countries usually engage in business among themselves so as to get what they cannot produce and, on the other hand, share what they have in plenty. Foreign direct investment has led to development of good political and social relationships among countries. Improved relations translate to better trade and increased social and economical benefits. It has also led to political stability in developing countries through the support they get from the top economies.
Developing nations adapt leadership skills used in the already developed states in political and administration realms. Improvement of infrastructure has also been influenced by the business relations between countries involved in investment plans. Throughh the foreign direct investment initiative, a host country is able to get sponsors for its major infrastructure development programs (Zarsky 2005, p. #). A good number of jobs have also been created and, in turn, the tax returns of the host country have improved. This also increases the standards of living to the beneficiaries of the investment programs.
It cannot go without mentioning that FDI has created market for goods produced in different countries through production segmentation. For example, Kenya produces tea and exports it to Europe and the Middle East and, in return, Kenya gets oil. Arguably, FDI has some negative impacts to the host country as we have already seen above. Apart from causing environmental degradation, it has also caused air and water pollution through setting up of industries (Moosa 2002, p. #).
Cutting down of trees also promotes soil erosion. Overexploitation of resources and manipulation of host governments are also common trends in such arrangements. Foreign direct investment FDI has also caused displacement of people and conflicts among governments and the locals who may be suffering while the country benefits at large.Positive impacts of FDI are, however, much greater compared to the negative results. To embrace industrialization, people have to learn to minimize the negative effects of foreign direct investment and the correct processes should be followed by the government while issuing foreign firms opportunities to invest. Local people should also be given a chance to express their views, and they should be educated on the impacts of foreign business engagements so as to reduce conflicts and also minimize effects.
As much as foreign direct investment programs are favorable to countries with huge economies, developing nations should also strive to excel in the program, as it contains many benefits in monetary, social or political benefits.