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

Foreign Direct Investment (FDI) occurs when a business with headquarters in one country establishes operations, such as factories or offices, in another country. In Indonesia, FDI affects businesses in several ways.

One significant impact of FDI is the increase in demand for products. As multinational corporations establish operations in Indonesia, they bring in their branding and marketing, which can lead to a higher demand for their goods. For instance, companies like Nike and Toyota not only create jobs but also promote local consumption of their products.

Moreover, FDI leads to lower costs for local retailers as it encourages the establishment of supply chains that leverage local resources and labour. This can further lead to increased competition as FDI companies often bring newer technologies and practices that can enhance productivity in local markets.

In summary, FDI enhances business operations in Indonesia by increasing demand for goods, lowering costs, and encouraging competition.