FDI Foreign direct investment

According to my opinion I believe that FDI is the most effective strategy in combating the world developing poverty in comparison with corporate social responsibility because of the following details given below

In the current context of increasing globilsation, there exist many arguments that it may not affect the poor.FDI is also considered an integral part of the economy. Hence to what extent FDI contributes to poverty

reduction may be a relevant question to the country. The last decades of twentieth century were marked by increasing globalization helps raise economic growth.

          FDI influences on poverty reduction can be classified into direct and indirect impacts. The indirect impact contributes through the FDI contribution to economic growth; one of the major factors for poverty reduction.FDI also contributes to the tax income of the state budget and may thus facilitate the government led programs for the poor in the developing countries. Moreover FDI may induce host governments to invest in the infrastructure. If this investment is in the poor areas it may benefit the local poor. The direct impact on poverty is assumed to be its effects on unemployment.FDI may affect economic growth through raising the total capital formation. This is because FDI provides external finance and may help reduce financial constraints on investments due to low savings.Moreover; FDI may crowd in domestic investment through backward and forward linkages. In addition inward investments may induce local governments to invest in infrastructure like roads, bridges, harbor, water and electricity supply which might facilitate domestic investment as well.FDI may bring technology, know-how and marketing skills to the developing economies representing something more than a simple import on capital. Foreign direct investment a key ingredient of successful economic growth and development in developing countries - partly because the very essence of economic development is the rapid and efficient transfer and cross-border adoption of "best practices.FDI especially well suited to effecting this transfer and translating it into broad-based growth, not least by upgrading human capital.

Growth is the single most important factor in poverty reduction, so foreign direct investment is also central to achieving that important World Bank goal. Government-led programs that improve social safety nets and explicitly redistribute assets and income might direct more of the fruits of growth to the poor. And growth is needed to fund these government-led programs.

Moreover, the delivery of social services to the poor - from insurance schemes to such basic services as water and energy - can clearly benefit from reliance on foreign investors.

In short, foreign direct investment remains one of the most effective tools in the fight against poverty.

On the other hand when i speak about 'CSR' I feel that it is not a major tool in combating the world poverty because;

Corporate social responsibility is just self- interest. The world has changed. Even in this economic downturn corporations are being to adopt socially responsible sustainable profits. But how much business is responsible for? The question is whether corporate social responsibility is the province of business and a strategy to reduce poverty. As we understand it, CSR is not only about protecting the environment, stakeholders, complying with anti-corruption action policies and a range of other activities but it also aims in eradicating poverty. However it is not a very powerful tool as FDI. Currently there are 37 million people live under poverty line where there has been no significant poverty alleviation since 2001 (Kompas, December 10, 2007).Poverty alleviation (one of CSR initiatives) is one of the major objectives of every nation, international organization, non-governmental organization, and local community. The current CSR approaches do not warrants claims that CSR gives benefit to the poor and marginalized in developing countries. Nowadays we see that only 11 percent of CSR funds are devoted to fight against poverty. There is a need to set the priorities and to coordinate these efforts. What is lacking is the active involvement of the business leaders and public figures. This is needed to create a momentum for setting the poverty alleviation as a top priority of our social agenda.

          Moreover it can be said more precisely that FDI is a major factor responsible for combating the world poverty. CSR focuses more on profits motive. Its about taking an initiative by all the corporate leaders and help in reducing the world poverty. Therefore FDI is the more prominent measure.

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