FDI Risks: Analysis of BRICS, MINT Countries, and Political Risk

This report delves into the risks associated with Foreign Direct Investment (FDI), analyzing determinants and political risks in the context of BRICS and MINT countries. It investigates the impact of political instability, socio-economic factors, and government stability on FDI inflows. The report references studies examining the role of BRICS and MINT economies in shaping the global landscape and highlights the need for governments to create attractive investment environments. It also assesses the negative impact of political risks, such as corruption and military involvement, on FDI. The findings emphasize the importance of understanding and mitigating these risks to foster sustainable economic growth and attract foreign investment.

Running Head: RISKS ASSOCIATED WITH FOREIGN DIRECT INVESTMENT
RISKS ASSOCIATED WITH FOREIGN DIRECT INVESTMENT
NAME OF THE STUDENT
NAME OF THE UNIVERSITY
AUTHOR NOTE

Introduction
For the socio-economic transformation of any country-investment is the key, whether it
be foreign or domestic. It has been observed that during the year 1960s and 1980s, there has been
an imposition of the restrictions on the trade in order to protect the domestic industry from the
influence of their foreign counter-parts, so that they will be able to conserve the foreign
exchange reserves. However, FDI in the developing countries has the potential to prove
beneficial to both the host country as well as the companies who are seeking to invest for
example, the MNCs.
Determinants of Foreign Direct Investment in fast-growing
economies: evidence from the BRICS and MINT countries
The above study deals with certain question that will answer the determinants to attract
the FDI in the BRIC and MINT countries where the BRIC stands for the and the MINT stands
for the. It will further specify related to the roles of BRIC and MINT in the shaping of the global
economies, which should not be underestimated as they have contributed to the 19% of the
global GDP and also will provide important insights related to the risks associated with this. In
order to sustain the inflow of the FDI, it has to be ensured by the government of these countries
to keep it attractive for the investment. Therefore apart from large scale market and the
geographical location which requires to be strategic, they also need to ensure political instability
within the countries, as it will ensure reduction in investment risks. (Asongu, Akpan & Isihak,
2018)

Impact of Political Risk in Foreign Direct Investment
In this study the author has tried to put focus on the political risk related to the foreign
direct investment. It has been noted by the author that since there are several other risks as well
like the economic risks and the financial risks associated with the FDI. However, political risks
has not been studied as much due to the lack of the data and therefore, this study focusses on the
above parameters. After the evaluation it has been noticed that the political risk indicators that
are in the form of socio-economic factors, stability of the government and the investment profile
do have a negative impact on the FDI in the one-way fixed effect model. This identifies that the
political risks possess a negative impact on the FDI. As a positive co-efficient, corruption and
military has implied that an increase in the respective indicators would actually mean to increase
in the FDI, which will be there for the controlling of the individual effects. Other indicators does
not showed much significance apart from having a negative impact on the FDI. (Khan & Akbar,
2013)

References
Asongu, S., Akpan, U., & Isihak, S. (2018). Determinants of Foreign Direct Investment in Fast-
Growing Economies: Evidence from the BRICS and MINT Countries. SSRN Electronic
Journal. doi: 10.2139/ssrn.3266224
Khan, M., & Akbar, M. (2013). The Impact of Political Risk on Foreign Direct
Investment. International Journal Of Economics And Finance, 5(8). doi:
10.5539/ijef.v5n8p147