Foreign Capital Essay Example for Free

outside(prenominal) Capital EssayForeign crackingThe expectant available to any country other than the domestic capital in order to finance any domestic purpose is called foreign capital. Need for Foreign Capital1.Capital investment requirements Since underdeveloped countries want to industrialize themselves within a short period of time, it becomes necessary to increase capital investment substantially. This requires a high level of savings. However, because of general poverty, the savings are very low. This creates a choice gap between investment needs and savings. This gap has to be filled by means of foreign capital. 2. Technology transfers The under developed countries have lower scientific capacity as compared to advanced countries. The desire for industrialization creates the need for importing technology from advanced countries. Such technology transfer usually comes with foreign capital in the form of private foreign investment or foreign collaboration. The techn ological gap is reduced by training domestic personnel and through establishment of educational, research or training institutes.3. Exploitation of natural resources A number of underdeveloped countries possess huge mineral resources, which can be utilize for economic development. These countries do not possess the required technical skill and expertise to accomplish this task. As a consequence, they have to depend upon foreign capital to undertake the exploitation of their mineral wealth.4. Development of entrepreneurship Many under developed countries suffer from shortage of private entrepreneurs. This creates a limitation in the touch on of industrialization. Foreign capital undertakes the risk of investment in host countries and thus provides the much-needed impetus to the process of industrialization. Once the process of industrialization gets started with foreign capital, domestic industrial military action also increases through greater local participation. This automati cally develops local entrepreneurship.5. Development of economic infrastructure The domestic capital in under developed countries is little to build the required level of economicinfra structure. Thus these countries require the assistance of foreign capital to undertake this task. Over the last 50 years, foreign financial institutions and governments of advanced countries have made substantial capital available to the under developed countries to develop their economic infrastructure in the form of channel and communications systems, generation and distribution of electricity, development of irrigation facilities, etc. The basic intention is to build an economic model for achieving sustainable development.6. Financing balance of payments deficit In the initial phase of economic development, under developed countries face larger imports (in the form of machinery, capital goods, industrial raw materials, spares and components), than exports. The deficit in the balance of make o ut is financed by inflow of foreign capital. The economic development of an underdeveloped country therefore needs foreign capital to initiate its economic development process and sustain it till desired level of stability is reached