Explain one way foreign direct investment (FDI) affects businesses in Indonesia. - Edexcel - A-Level Business - Question 2 - 2022 - Paper 1

With FDI, Indonesian businesses, particularly in the textile and rubber sectors, are likely to experience an increase in demand for their products. This demand surge may result in higher sales and revenue for local businesses as foreign companies source materials domestically.

As FDI brings in companies that can afford to invest in local resources, it can lead to lower costs for Indonesian retailers of sportswear and other consumer goods. If these foreign investments capitalize on local land and labor, it often results in decreased operational costs, allowing both local retailers and suppliers to enjoy increased profit margins.

FDI also brings additional competition from other sportswear brands entering the Indonesian market. This competitive landscape can push local companies to innovate and improve their offerings, thereby enhancing overall market dynamics.

The introduction of foreign companies often includes technology transfer to local Indonesian businesses. This transfer of skills and technologies can eventually lead to modernization and improved productivity within local industries.