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The Costs and Benefits of FDI 1 points To a greater or lesser degree, many governments can be considered pragmatic nationalists when it comes to foreign direct investment (FDI); this means it has both benefits and costs. FDI can benefit a host country by bringing capital, technology, and jobs, and it can also have a negative effect on a country's balance of payments. Accordingly, government policies are shaped by a consideration of these costs and benefits of FDI. eBook Home countries can adopt policies designed to both encourage and restrict FDI. Host countries try to attract FDI by offering incentives and try to restrict FDI by dictating ownership restraints and requiring that foreign multinational enterprises (MNE) meet specific performance requirements. Print References Roll over each item on the left to read its description. Determine whether the scenario represents a benefit or cost to the home or host country, and then drag it to the appropriate place on the chart. Loss of local entrepreneurship HOST-COUNTRY BENEFIT HOST-COUNTRY COST Inflows of foreign earnings Home countries can adopt policies designed to both encourage and restrict FDI. Host countries try to attract FDI by offering incentives and try to restrict FDI by dictating ownership restraints and requiring that foreign multinational enterprises (MNE) meet specific performance requirements. Roll over each item on the left to read its description. Determine whether the scenario represents a benefit or cost to the home or host country, and then drag it to the appropriate place on the chart. Loss of local entrepreneurship HOST-COUNTRY BENEFIT HOST-COUNTRY COST Inflows of foreign earnings Substitute for imports Outflow of earnings from a foreign subsidiary Host country limits profit expatriation HOME-COUNTRY BENEFIT HOME-COUNTRY COST Skills that can be leveraged internationally. Increase in direct and indirect employment Loss of jobs Loss of economic independence Transfer of new technology