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There can be certain advantages or disadvantages of foreign direct investments by any multinational company. a few can be:
ADV:
Access to new market
Access to resources
Reduced cost of production
DIS.ADV:
Unstable socio-economic conditions.
Poor law-and order situations.
weak political & legal system.
I don't know much about that, but I believe international companies will face many problems, if they don't know the market very well or cannot be competitive.
One pertinent reason for this sentiment is that many developing countries, or at least countries with a history of colonialism, fear that foreign direct investment may result in a form of modern day economic colonialism, exposing host countries and leaving them and their resources vulnerable to the exploitations of the foreign company.
While FDIs may increase the aggregate demand of the host economy in the short run, via productivity improvements and technological transfers, critics have also raised concerns over the efficacy of purported benefits of direct investments. This theory follows the rationale that the long-run balance of payment position of the host economy is jeopardized when the investor manages to recover its initial outlay. Once the initial investment starts to turn profitable, it is inevitable that capital returns from the host country to where it originated from, that is the home country.
The key implication is this: While the levels of FDI tend to be resilient during periods of economic uncertainty, it has the potential of adversely affecting the net capital flow of a developing economy especially if it does not have a healthy and sustainable FDI schedule.
It is also often argued that FDIs generate negative externalities in the labour market of the host economy. Why so? All firms are profit maximizing entities, and one way to achieve this is often the most direct approach of cost reduction. FDIs may enter the host country for unique strategic reasons but there is ultimately the need to achieve returns on investments.
Evidence shows that multinational companies do pay a slight premium over local-term wages, but does this really benefit the host economy? Paying a premium for the price of labour may improve the consumption power of workers, but it also has the detrimental ability of disrupting the local employment market. When prices rise, supply increases while demand falls. Similarly, when the price of labour increase, wage premiums in this case, this creates a distortion and creates a disequilibrium in the labour market. Job matching stops being efficient and may even create unemployment.
