The Impact Of Foreign Direct Investment On Human Rights And The Economy: An Essay.

Positive Impact of FDI on the Economy

The relationship and FDI has always been a reason for controversies in international politics and economics. The researchers have been focusing on the impact of FDI on the human beings and their basic right. Many nations have welcomed FDI, yet the issue has always gained a significant amount of criticisms and opposed by the citizens because of the negative impact it puts on the lives of the people in the country where the investment is done (Lechner 2014).

The basis of international human rights law is that they are universal in nature. The concept of Human rights was first introduced in the Universal Declaration of Human Rights in 1948; it was also put forth in other international human rights conventions, resolutions and declarations. The guidelines were given to the states for promotion and protection all the human rights and fundamental freedoms of their citizens without any irrespective of the political, economic and cultural systems, in the Vienna World Conference 1933. All the countries have agreed upon all the treaties whereas 80% of the states have agreed upon four or more basic the human rights treaties, this shows the agreement of the states. Hence a legal obligation has been created on the states regarding the adherence of the Human rights principles. Except for certain situations, the human rights of the citizens are to be taken away, example, the right to liberty to an individual will not be provided to him or her if he or she has been proved guilty of any criminal offence as per the law of the nation or the general rule of law (Lechner 2014). 

All human beings are free and equal right from their birth and no individuals should be discriminated, all should have their right to life, slavery should not be practiced in any form. All individuals have the right to be safe and not be harmed by anyone. The human rights will remain the same in all the corner of the world if no matter where the individuals go. All individuals are equal before the law, all have the right to justice if they are victimized and if found guilty of any criminal offence, the law will treat everyone the same irrespective of the political and social status or position of the person. The law protects the human rights. There should not be any unfair detainment of individuals. All the individuals have the right to trial. All individuals should be treated innocent unless they are found guilty. All individuals have their right to privacy. People can move freely without any obligation within the borders of their country unless the law restricts it on the ground of security issues or emergencies like war. Right to shelter, job opportunities, education and living a good standard of life are the basic rights of the individuals and must be given to them. Individuals have the right to enjoy the nationality of the country they belong (Lechner 2014).

Negative Impact of FDI on Human Rights

One of the factors that affect the human rights both in a positive and negative way is Foreign Direct investment, human rights forms the basis of overall development of a nation.

Foreign direct investment has many benefits for the citizens where the investment is done, it provides job opportunities to the citizens of that country.  The technologies used in different countries differ largely, the technologies and methods used in developed nations is highly advanced than that of developing nations, so when a company opens a manufacturing facility in another country with the same technology, then definitely there it will be beneficial for the host country.  A new technology will be introduced in that country, a trend will be set and all the other companies will do the same. Productivity of that nation will be increased, infrastructure of the country is improved, the income of the working class of that country is increased and hence the standard of living of the citizens is also improved (Garriga 2016).

FDI boosts the economy of the country where the investment is made, in developing countries FDI is the main source for external financing. Higher output are created by capital inflows, it also creates job, the problem of current account deficit is also solved by capital inflows in a country. Foreign investments results in increase in the salaries and the wages of the working class of the country (Garriga 2016). 

On the other hand, introduction of that technology will affect many labours those who are not skilled enough to work with the technology, this creates a lot of competition between the individuals of the country and there is a significant amount of struggle between the skilled workforce and the unskilled working force resulting in loss of employment by some individuals. Another most argued disadvantages of FDI, is that when a foreign business enters into another country, it affects the business of the small and medium enterprises in that country. The small businesses face a lot of competition from these foreign companies because of better efficiencies and this has been the major reason behind the repulsion of FDI in many developing countries (Garriga 2016).

FDI, stands for foreign direct investment which is made by a company, individual or a country in business of another country. It is a growth and expansion strategy of a company to enter into another country. It is done either by establishing operations in another country or by acquiring business assets in another country.  One of the features of FDI is that the company that invests their capital in the business of other country gains a substantial power over the decision making of the company (Garriga 2016).

Factors Affecting FDI

There are lot of factors that affect the foreign investment in a country, these factors are, government regulations and policies related to investment. Any country that has policies that favour FDI, like the tax regulations, makes investment in that country very easy. Availability of resources in any country is also one of the determinants of FDI and becomes a major factor while deciding in which country investment should be done. Availability of skilled labour force in that country is also affects the foreign investment decision. Economic growth is also a very important factor if the economic growth of a country is slow then investing in that country will not be a wise decision. Political stability in the country where the investment is to be done is also an important factor. Low cost of production attracts investors, China is one of the most favoured nations in terms of FDI because of low cost of production in that country (Garriga 2016). 

Foreign Direct Investment has both positive and negative impact on the nation, so the government of the nations need not discourage or should they encourage FDI too much. FDI should be allowed in the sectors like infrastructure, like construction of roads, railways, airports, hospitals and public transport facilities. FDI investment in these sectors will definitely help improve the life of the people. FDI in the sectors where there are too much small and medium enterprises should be restricted, restriction of FDI should also be in those sectors where the business is flourishing and yet to fully established,  because it will affect the business of small and medium enterprises. Government should focus on the training and development of its citizens and empower them so that they do not lose their jobs in case of introduction of new technologies. The government of any country should allow FDI only when the individuals of that country are given employment opportunities (Garriga 2016).

Human rights are affected negatively through the Foreign direct, the worker’s rights are violated, for setting up manufacturing facilities the lands of the poor are taken away, due to the pollution caused by the manufacturing facilities and factories, the air and water are polluted. Investing in horticulture and floriculture industry directly affects the right to food of citizens. The small scale farmers are affected because of the demand for large scale farming increases for the supply of raw materials to the foreign agro based companies. Foreign companies are often accused of buying agro products at a cheaper rate from the farmers and selling those in the supermarkets at a higher price, the small-scale farmers do not get a fair price for their production (Lechner 2014).

Establishment of manufacturing facilities of technology transfer introduces an advanced technology in the country, which increases the production but demands skilful labours for production, which creates a need for training and development and also making certain unskilled labours unemployed in some cases (Lechner 2014). 

When a manufacturing facility is opened in, another country of there is technology transfer then the need for skilled labours is generated, it creates the need for training both the existing employees and future employees, technology change requires high quality of labours to carry out the operations through the use of new technology (Lechner 2014).

Conclusion

FDI is unavoidable for any country, it has many advantages as well as disadvantages that are the reasons it faces some restrictions in many countries and is accepted in others, like Singapore, which is known as the commercial trading centre, since it is the most favoured nations for FDI. In the first quarter of 2017, FDI in Singapore has increased by 25144.80 SGD Million. In Singapore FDI has mostly benefited the country, the country today has a very high growth rate and the standard of living in Singapore is very high. The tax system of Singapore encourages foreign investors to put their money in the business of that country, the tax system of Singapore has helped and supported the growth of economy of the country. Though many economists have been suggesting that Singapore should use tax incentives, it will add value to the society and economy of the country (Lechner 2014).

References

Garriga, A.C., 2016. Human rights regimes, reputation, and foreign direct investment. International Studies Quarterly, 60(1), pp.160-172.

Lechner, L., 2014. Human Rights and International Trade: Why do Countries include Social Law Provisions in Preferential Trade Agreements.