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Sustainable Economic Development And Foreign Investments

In the present era of rapid increase in globalization many countries aim for sustainable economic growth. It has became a parameter check to the development of a particular nation. Sustainable economic growth has become primary concern of the policy makers and governments of various countries especially of developing nations of the world. Among the various methods to develop the economic development, one of the important vital source for such development has been the increase of the Foreign investment or FDI.

The Central Idea Behind This Paper Is The Link Between The Sustainable Economic Development And FDI. How It Is Linked Is The Primary Explanation I Would Like To Give.

What does sustainable economic development mean?

Sustainable economic development actually refer to the economic growth with the resources available. It’s the point of equilibrium between the economic needs of a country and the resources available to satisfy them. It mainly aims in bringing parity between the wants and needs of a nation with its resources. Sustainable economic development is point of check of the present generation needs and wants versus the future generation needs and resources.

Sustainable economic developments is a complex process consisting of a quantitative aspect that is the wealth of a country, a qualitative aspect that is its modes of achieving growth and also an intangible aspect which is a social organisation of a nation. It’s a combination of these three aspects. It a process which is linked with the development and growth of a nation. This concept demands a harmonization of the two important aspects which are the ecology and the economy.

The thing which must be respected is that the ecology has its limits .The resources that are available in particular ecology is limited in quantity which can gradually hamper the productivity and economy of a nation .On other side the unlimited wants and needs of the economy make it much more harder for harmonization of these aspect.

Sustainable economic developments relates to the concepts of efficiency and optimum utilization of resources and stepping towards a more systematic economy where there is least wastage and maximum satisfaction of wants .The present utilization of resources leads effecting both the present as well as the future generations.

The synergy between the man and environment, sustainable economic development mainly focuses on the development of technology, productivity, services and various other important and dominant sectors of economy that would lead to the efficient and developed economy.

The longitivity of development is dependent on what the sustainable economic development is actually based on, which is leading to its development. This concept is ultimate result of proper choices, various industrial techniques and proper financing. Proper reconciliation of these three factors will lead to better economy.

Various Ways To Increase The Sustainable Economic Development

  1. Increased manufacturing\productivity
    Sustainable economic development which mainly focuses on the satisfying the needs,demands and wants of the humans and gradually leading to the increase in the wealth and growth can be actually done through increase in the productivity .It means by producing more number of goods and services which lead to the increase in the economic indexes of the country like Gross domestic products etc. By production of more goods and services there is an extensive integration of local, regional and national markets of an economy.

    But the drawback that lies within is that the production of more goods and services need more resources but as we know the ecological limitation that exist make it highly difficult for the nations to increase productivity. The efficient use of resources can be done but it would lead to increase to certain amount and the optimum utilization concept is speeding up it pace and reaching humans at very low rate .Many economies of the globe has not imbibed the concept of optimum utilization leading to low productivity and becoming a drawback to the economic growth .The zeal of increasing the productivity and wealth has made humans exploit the ecology beyond it limitations, making it difficult for present and future generations.

  2. Proper choice
    This is one of the important factor that plays a crucial role in changing the economic growth and development either in positive way or completely in negative. As said one decision can make a lot of differs, in that sense a decision regarding investing of resources in particular project can be a boon or bane. The investment of resources in one project turning successful is completely uncertain as its effected by various other factors which can completely turn the game upside down.

    But making cautious decisions and choices and be a boon to the economy .One of the major drawback lies in this is the uncertainty lies within is that The resources can go completely into vain by one wrong choice, leading a gradual fall in the parameters of wealth.

  3. proper financing
    this is factor that is interlinked with productivity aspect.
    Financing is an essential factor that enables to begin any project or increase the productivity. The sources of Finance available within one nation is restricted and cumbersome sometimes to avail it.
For every aspect the monetary funds are required, from changing the economic status of peoples to eradicate the poverty .But as said, the sources of availability of finance is limited which leads to hampering the economic status of a country. To enhance the potentiality of the economic factors also there is a necessity of finance.

Foreign Investments

How to overcome this problems?
The development of any country is depended on the internal and external economic factors. The important economic factors that form a major role in expansion of sustainable economic development has drawbacks which needed be answered by other alternatives and one of such alternative and the answer to this is the foreign direct investment (FDI).

The worldwide shift in the economic framework happened with the introduction of the liberalization, privatisation and globalization poliy,1991 (LPG) which brought focus over the foreign investments and its helping hand in the sustainable economic development process.

Especially in developing countries like India after the introduction of LPG,1991,their has been an evident shift in the rate of foreign investments.

How Did LPG Aid In Increase In FDIs?

With introduction of economic policy 1991,there has been liberalization of various tax norms and licensing norms.

Earlier license for manufacturing was made compulsory and allotment of license was given on various prerequisites being satisfied which made it a long and cumbersome process.

But with new economic policy,1991 there has been relaxation of these licensing rules and the trade tax barriers and other tax payments were relaxed making it easy for investors from other countries to set up firms in various countries other than the parent company for its expansion. This lead to the rapid growth in the integration various economies of the globe and many investor were interested in setting up their business units in foreign countries which was adding on to the economic parameters to arouse.

The globalization process Has triggered the economic integration among various countries, along with it also geared up the rate of transnational corporations and foreign direct investment activities. Globalization has lead to a solution to the problems and drawbacks of the sustainable economic growth by increasing the foreign investments and There has been a rapid growth in the rate of foreign investments from 1970’s to 1990’s which was solely achieved by international trade. This has lead to a new era of globalisation leading to opening up of the economies of the nations and making it a border less nations.

The globalization has lead through increased trade, new technologies, foreign investments and expanding media and internet connections. There has been paradigm shift in the economies of the nations due to globalization and with this a new concept has lead to the development .Globalization was characterized as a shrinking space, shrinking time and disappearing borders has led to opening of opportunities of FDI. Due to globalization there has rapid integration of communications, ideas, solidarity, biotechnology and markets .This has led to contribution to the economic growth involving the interconnection between economic, social and political factors.

The Interlink Between FDI And Sustainable Economic Development

Foreign direct investments means investment in the production facilities, financing and establishments of MNC’s in foreign countries. It plays crucial role in developing countries as it gives an opportunity to the nations to get resources for increase in the production sector .It not only aids the secondary sector but also acts as a boon to the tertiary sectors of developing nations and also by increasing the skills, technological advancement, innovations, Managerial practices etc in the foreign countries where investments are done.

Its has become a vital driver for economic growth and an important source of Non –debt financial resources for country for economic development, Income growth and employment. In any economy the sustainable economic development is dependant on the finance, monetary funds and other factors .By foreign investments, foreign countries are interested in investing funds in the secondary sector of the foreign countries by setting up of MNC’S or by buying shares in the company or purchasing the loss making entities or merging with the companies.

This would lead to developing of the industries and leading to increase in the efficiency of the resources available with them. Also by such investments, there is introduction to new advanced technologies which can be useful to add on to the industries productivity. The development of productivity of industries will gradually trigger the sustainable economic development. It also enables the availability of more resources for setting of new firms by making available the finances and other important technology that is necessary.

There is an great interrelation between FDI and sustainable economic development .and this interconnection has lead to many advantages to the economies of the investing countries.

The advantages that FDI contribute to the SUSTAINABLE ECONOMIC DEVELOPMENT are as following-

  1. Increase in the resources and resource developing -The resources available with one nation is restricted but when there is Foreign investments the resources are added on which eliminates the hindrance in the increase in the productivity.
  2. Eradicate poverty-The increase in sustainable economic development will lead to rapid rise in the economic parameters of the country which will eradicate the poverty at least to certain extent This is done by provision of employment and also at least to show cause the country as a emerging market the government will frame policies and take measures to reduce poverty.
  3. Development of infrastructure and tertiary sector-one of the major contribution by FDI is the development of the tertiary sector which is supporting sector to the
  4. Create more jobs- With more number of flow of industries into nation in the form of Foreign investment it creates more employment opportunities.
  5. More in flow of capital-foreign investors invest in the shares of the companies leading to increase in the capital inflow . Capital investment can be done to acquire assets or stake in any enterprises.

Advantage of FDI To Developing Countries

  • Developing countries like India has seen that FDI as a factor for increase of sustainable economic development.
  • Developing countries have liberalized their regimes so thatit can attract more of foreign investments.
  • They have focused more formulating domestic policies that can lead to maximization of the benefits of foreign presence in domestic economy.
  • Due to the foreign integration of economies and markets and entering of foreign players into domestic mark benefits the host country in terms of various aspects from increase in capoital
  • inflow to the increase in political relations between countries.
  • Developing countries like India has increased the concern of enhancing its image as emerging market economies by various policies and measure of the government of the domestic nation.
  • Domestic country focus more on the economic growth and positive social impact rather than hampering or interfering the economic development or sustainable environment of a country.
  • Every aspects has both pros and cons in same way the foreign investments as a negative side which is widely ignore due to its positive points that it show cause.
  • But these point need to given attention for sustainable economic growth to be maintained in long run.

The Negative Aspects
  1. Global advancement has lead to increase in the expectations of foreign investors leading to lot of difficulty to cope up with their expectations when the internal factors have changed.
  2. With the increase in global integration their is simultaneous increase in the insecurity, uncertainties surrounding it and potentiality of the stimulants of the sustainable economic development in countries like just developing countries.
  3. There has been a lack of understanding regarding the sustainable economic development and foreign direct investment link and sometimes many countries over see the domestic development
  4. It hampers the growth if properly not handled and can has extensive effect on the people and various sectors of the host country.

How To Overcome These Negative Point And Attract More FDIs?

  1. Proper FDI Policies
  2. Developing The internal Business
  3. Creating Potential Market Place.
  4. Preparing For The Uncertainties And Proper Protection To The Foreign Investors

The foreign investment in any nation or country has its pros and cons. But a proper legislative, administrative actions must be taken to guarantee certainty of the investments done by foreign countries and also necessary to overcome the other disadvantages And the negative impacts of FDI’S can actually cause. Another point that need to be kept in mind is that FDI of a country should be such that which in parity and pacing with the BRICS economic growth.

The domestic or host countries shall need to formulate various policies and protocols which can lead to increase in the foreign investments. A step towards providing certainty and safety to the funds invested by foreign countries can lead to increase in the investments that are essential for any country to develop .By considering these points and formulating policies and serious implementation of these will definitely help countries to prosper.

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