Question

How does an outflow of FDI benefit a home country? Take the case of an outflow...

  1. How does an outflow of FDI benefit a home country? Take the case of an outflow of FDI/MNCs from the US and explain at least four benefits that the US expects from its overseas investments/investors.
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Answer #1

FDI benefits both home country and host country. The cost to home country due to FDI is a benefit to host country and vice versa.

Take the example of Dominos outlet:

a) If dominos is opening branch in overseas, it initially leads to capital outflows(initial investment) but overtime profit will flow to home country and thus a credit in the BOP of home country.

b) The outward FDI also benefits the home country by creating new job market resulting in increase in necessary skills of people of home country.

C) Reverse rresource transfer happens. Transfer of managerial skills benefit the home country in organising the business of home country.

d) Dominos outlet in overseas imports some raw materials from its home country. Thus again this is credit in the BOP of home country.

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