Question 1: The Transformative Power of Foreign Direct Investment (FDI): A
Path to Poverty Reduction and Economic Progress
Foreign Direct Investment (FDI) allows for the transfer of funds from foreign people or businesses to
a nation, this creates a highway for the transfer of foreign information to the host country which in
turn can reduce poverty levels in the foreign and domestic countries alike.
FDI can reduce poverty levels through the exchange of cutting-edge technology, knowledge, and
management techniques between foreign and domestic businesses, which is commonly included in
FDI. Technology's spread may boost productivity and competitiveness, opening doors for economic
expansion and employment development. For instance, global firms frequently impart cutting-edge
production techniques and best practices to the nations where they are based.
The host country can support its anti-poverty activities, which range across a variety of social welfare
programmes, healthcare improvements, and educational breakthroughs, thanks to the increase in tax
revenue brought about by FDI.
FDI can also serve as a stimulus for the creation of many types of infrastructure, including roads,
utilities, and seaports. This increased infrastructure therefore creates a favourable business climate
and supports economic growth. Additionally, FDI frequently involves investments in the improvement
of the knowledge and abilities of the local worker, resulting in a more skilled and qualified labour
The ripple effects of job creation are another significant part of FDI's importance. Jobs are inevitably
created or expanded as a result of FDI, and these jobs are vital for eradicating poverty since they give
individuals and their households financial security.
FDI and reduced poverty typically have a beneficial association, according to empirical findings. For
instance, South American Brazil has seen considerable foreign direct investment in various sectors,
including the car and electronics industries. Research indicates that FDI benefits Brazil's income
distribution by reducing income inequality and, as a result, aiding in the eradication of poverty
Furthermore, Chile has successfully recruited FDI to the mining and manufacturing sectors. Because
of this investment's increased employment opportunities and economic diversification, poverty rates
have decreased (InvestChile 2021).