What is the role of foreign direct investment (FDI) in a country’s economy?

Foreign direct investment (FDI) is the investment made by a foreign entity in a business or assets within a country. FDI plays a vital role in the economic development of the host country by bringing in capital, technology, and expertise that can stimulate growth. It can create jobs, improve infrastructure, and increase productivity, contributing to the overall development of the local economy. FDI also fosters international trade relationships and can lead to the transfer of knowledge and innovation. Governments often encourage FDI through incentives such as tax breaks, but excessive dependence on FDI can also pose risks if foreign investors withdraw their capital during economic downturns.