Finance Essay Sample: A Concern for Foreign Direct Investment by Canadian Firm

Foreign direct investment (FDI) is something that presents an opportunity for the local people to enjoy economic growth in their zone. However, the impacts of Foreign Direct Investment on the locals can have far-reaching consequences with regards to the long-term growth plans of a people. Serious concerns have been raised about the investment of foreign firms in large stake holdings within in a locality especially with regards to the sustainability of local businesses in the area. This part looks at the disadvantages of foreign direct investment to the locality should the Canadian investor bring in the largest shopping mall and entertainment facility to the locality.

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One of the major concern that I have as a representative of the citizen group is the social effect that the firms investment will have on labor relations in the locality. The biggest entertainment facility and shopping mall will no doubt contribute to the largest employer in the locality. Therefore, the majority of workers will be servicing the facility. Being the chief employer, there is a possibility that it will have a large control over labor unions. This means that unions will be forced to hold down wages, benefits and other standards that would otherwise apply if the power of the employer was not as much. With such controlling interests in the labor sector, it means that workers can be misused, subjected to tough labor conditions among other social injustices that could come with the involvement of foreign bodies in a controlling share of the market (Donovan, Mooney, & Smith, 2012).

Another cause for concern is the effect to the economy that such an investment could have on the economy of the locality. While the employment levels will have risen, alternative providers of such services will have lost their business to foreign investors. The impact of the foreign investment will have meant that local businesses can no longer make profits from the small scale activities within the same industry. The creation of an all-in-one spot for all the shopping and entertainment experience that is required by the consumers of the locality will have been taken up into one place that is not locally placed. Furthermore, the implication of foreign investment is that the returns from the investment will be taken back to the parent country of the investors. This denies the host locality the benefit of such revenues in community enhancement and building exercises. Moreover, the shareholders of the company are most probably not locals. Therefore, very little local profit will come of the investment (Megele, 2012).

Another disadvantage of the foreign direct investment is that it will affect employment in another way. While the company will be based locally and will employ locals, the company will not use local supply chain techniques leaving the company at a disadvantage. This means that there will be limited application of the employment benefits to the locals. Furthermore, local competitors will be taken out of business with the expected size of the enterprise that the foreign company intends to put up. Local small-scale competitors may not be able to keep up with large investments that the foreign company will put up, and therefore render the locals jobless.

In my opinion, an investment of such magnitude would have some adverse effects on the population of the locality. The local authorities may need to examine the implications of the investment before approving such an investment.