Dubai American Academy

The only circumstance under which I would consider FDI a preferable alternative to internally financed development is if that latter is entirely impracticable for some reason, which strikes me as a particularly small minority of cases.

FDI represents a preference for immediate gratification over longer term interests such as autonomy and stability which are integral for reliable economic development. I understand why it happens, particularly in places where conditions are so deplorable as to render autonomy and stability relatively meaningless and abstract conceptions. At the same time, if you build your economy upon an externally reliant source then you become dependent upon that source so that severing that tie to assert your own interests becomes nearly if not entirely impracticable (i.e. the costs of doing so would revert the economy towards its earlier insolvency). Unless you mean to suggest that there are methods of execution whereby that dependency can be mitigated for early on rather than retroactively? No examples come to mind for me, but I am not especially well versed in this area and am open to learning if you are familiar with any.

The tradeoff with FDI is a variable loss of economic independence for a variable gain in economic growth. This is not especially unique to FDI scenarios, of course, since any substantial private capital investment represents a disinvestment of power from the public sector. The notable departure lies in the variable degree of insulation FDI ventures have from the public sector, either owing to international business law or simply to the preponderance of power borne by large multi-national financial interests (particularly in smaller economies). FDI may also limit opportunities for localized entrepreneurship by concentrating financial resources into an oligopoly or monopoly of organizations, preventing local domestic growth. Further, FDI agents are insulated from the repercussions of actions taken by the organizations they invest in and effectively control which can open the door for greater environmental or other abuses of power than might otherwise occur. Of course, there can be exceptions (and this is particularly the case where more developed economies are concerned) but generally speaking foreign investment sacrifices more national and local independence than domestic alternatives would.