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. 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. 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. Disadvantages - inflation may increase slightly - domestic firms may suffer if they are relatively uncompetitive - if there is a lot of FDI into one industry e.g. the automotive industry then a country can become too dependent on it and it may turn into a risk that is why countries like the Czech Republic are "seeking to attract high value-added services such as research and development (e.g.) biotechnology)" Disadvantages of Foreign Direct Investment FDI is not an unmixed blessing. Governments in developing countries have to be very careful while deciding the magnitude, pattern and conditions of private foreign investment. Possible adverse implications of foreigninvestment are the following: 1.When foreign investment is competitive with home investment, profits in domestic industries fall, leading to fall in domestic savings. 2. Contribution of foreign firms to public revenue through corporate taxes is comparatively less because of liberal tax concessions, investment, allowances, disguised public subsidies and tariff protection provided by the host government. 3.Foreign firms reinforce dualistic socio-economic structure andincrease income inequalities. They create a small number of highly paid modern sector executives. They divert resources away from prioritysectors to the manufacture of sophisticated products for the consumptionof the local elite. As they are located in urban areas, they createimbalances between rural and urban opportunities, accelerating flow of rural population to urban areas 4.Foreign firms stimulate inappropriate consumption patterns throughexcessive advertising and monopoli stic market power. The productsmade by multinationals for the domestic market are not necessarily lowin price and high in quality. Their technology is generally capital-intensive which does not suit the needs of a labour-surplus economy. 5.Foreign firms able to extract sizeable economic and politicalconcessions from competing governments of developing countries.Consequently, private profits of these companies may exceed social benefits. 6.Continual outflow of profits is too large in many cases, putting pressure on foreign exchange reserves. Foreign investors are very particular about profit repatriation facilities particular about profit repatriation facilities. 7.Foreign firms may influence political decisions in developingcountries. In view of their large size and power, national sovereignty and control over economic policies may be jeopardized. In extreme cases,

foreign firms may bribe public officials at the highest levels to secure undue favours. Similarly, they may contribute to friendly political parties and subvert the political process of the host country. Disadvantages of Foreign Direct Investment The disadvantages of foreign direct investment occur mostly in case of matters related to operation, distribution of the profits made on the investment and the personnel. One of the most indirect disadvantages of foreign direct investment is that the economically backward section of the host country is always inconvenienced when the stream of foreign direct investment is negatively affected. The situations in countries like Ireland, Singapore, Chile and China corroborate such an opinion. It is normally the responsibility of the host country to limit the extent of impact that may be made by the foreign direct investment. They should be making sure that the entities that are making the foreign direct investment in their country adhere to the environmental, governance and social regulations that have been laid down in the country. The various disadvantages of foreign direct investment are understood where the host country has some sort of national secret something that is not meant to be disclosed to the rest of the world. It has been observed that the defense of a country has faced risks as a result of the foreign direct investment in the country. At times it has been observed that certain foreign policies are adopted that are not appreciated by the workers of the recipient country. Foreign direct investment, at times, is also disadvantageous for the ones who are making the investment themselves. Foreign direct investment may entail high travel and communications expenses. The differences of language and culture that exist between the country of the investor and the host country could also pose problems in case of foreign direct investment. Yet another major disadvantage of foreign direct investment is that there is a chance that a company may lose out on its ownership to an overseas company. This has often caused many companies to approach foreign direct investment with a certain amount of caution....

1.FDI has and adverse effects on competition. 2.FDI will be make the host country lost the control over domestic policy. 3.One of the most indirect disadvantages of foreign direct investment is that the economically backward section of the host country is always inconvenienced when the stream of foreigndirect investment is negatively affected. 4.It has been observed that the defense of a country has faced risks as a result of the foreign direct investment in the country. 5.Certain foreign policies are adopted that are not appreciated by the workers of the recipient country. 6.Foreign direct investment disadvantageous for the ones who are making the investment themselves. 7.Foreign direct investment may entail high travel and communications expenses. 8.Another disadvantage of foreign direct investment is that there is a chance that a company may lose out on its ownership to an overseas company. This has often caused many companies to approach foreign direct investment with a certain amount of caution. 9.There is considerable instability in a particular geographical region. This causes a lot of inconvenience to the investor. 10.The host country is not well connected with their more advanced neighbors, it poses a lot of challenge for the investors. 11.Inflation is increased 12.Local market is affected badly