Objectives of foreign direct investment

1)Sustaining a high level of investment
- Since the underdeveloped countries want to industrialized themselves within a short period of time, it becomes necessary to raise the level of investment substantially. This requires, in turn, a high level of savings.���However, because of general poverty of masses, the savings are often very low. Hence emerges a resource gap between investment and savings. This gap has to be filled through foreign capital.

1. OBJECTIVES OF FOREIGN DIRECT INVESTMENT 1)Sustaining a high level of investment - Since the underdeveloped countries want to industrialized themselves within a short period of time, it becomes necessary to raise the level of investment substantially. This requires, in turn, a high level of savings. However, because of general poverty of masses, the savings are often very low. Hence emerges a resource gap between investment and savings. This gap has to be filled through foreign capital. Hey friend,

2. 2)Technological gap - The under developed countries have very low level of technology as compared to the advanced countries. However they possess strong urge for industrialization to develop their economies and to wriggle out of the low level equilibrium trap in which they are caught.  This raises the necessity for importing technology from advanced countries. Such technology usually comes with foreign capital when it assumes the form of private foreign investment or foreign collaboration.

3. Exploitation of natural resources – A number of underdeveloped countries possess huge mineral resources, which await exploitation. These countries themselves do not possess the required technical skill and expertise to accomplish this task. As a consequence, they have to depend upon foreign capital to undertake the exploitation of their mineral wealth.

4. Undertaking the initial risk – Many under developed countries suffer from acute private entrepreneurs. This creates obstacles in the programs of industrialization. An argument advanced in favour of the foreign capital is that it undertakes the risk of investment in host countries and thus provides the much-needed impetus to the process of industrialization. 

5. Development of basic economic infrastructure It has been observed that the domestic capital of the under developed countries is often too inadequate to build up the economic infra structure of its own. Thus these countries require the assistance of foreign capital to undertake this task.