Question

Should governments use regulation to promote or restrict FDI? What are the considerations involved? Explain your answer using any recent government activity (within the last three months) to support your answer.

Answer 1

FDI is considered as the most sought after way of increasing investment in domestic territory. It does not increase risk of returning back money. Thus government through distinct incentives invites the foreign investment.

But government also remains wary of inimical FDI. There are few investments that are being pursued only to make theft of technology. Thus government is restricting FDI in a few sectors.

FDI in telecommunication, batteries and other electronics is being restricted. Government fears that FDI in these sector will cause heavy loss to economy. president Trump alleged that Chinese companies have stolen the technology of US, thus such investment must be restricted.