World investment has led to globalization and has acted as lifeblood for many developing countries. Increase in world economy has led to arrival of new models and made finance easy available to many countries which earlier struggled to finance their projects. World investment is mostly in the form of foreign direct investment made by either banks or large financial institutions.
World investment has played a crucial role in development of emerging economies and provided them with much awaited financial assistance. This has led to growth in industrial and services sector and has helped to achieve globalization in true sense. The major benefit is that world investment has provided economies with promise of growth and stability. Foreign bank presence has helped provide stability to host countries and at the same time has helped in trade expansions. Foreign bank makes the financial market more competitive leads to growth in domestic financial market by exerting pressure on local institution to match the standard and quality displayed by the foreign banks. It leads to better risk management and competitive pricing and at the same time efficient distribution of credit. It also opens foreign market to local players and helps them set their foot in international market. Many foreign corporates have set foot in developing economies and are controlling a major market share. It generates employment opportunity which the domestic players have failed to create. It introduces new products and plays a major role in boosting innovations and research.
Too much of foreign investment might lead to situation wherein most of the economy’s equity will be held by the foreign companies. Further, the domestic players and government will also get dependent on foreign funds infusion. Under such situation the foreign investors might influence government policies to their benefit and deprive the domestic players of the government initiatives leading to unhealthy competition.
World investment has played a crucial role in economic development but extensive dependency on foreign funds might lead to issues at a future date. The government should take initiative to monitor foreign funds inflow and should formulate regulations to provide fair ground for competition to both international as well as domestic players.