Abstract

Advocates of trade liberalisation that include the Bretton Woods Institutions (BWIs) and their adherents in the third world encourage foreign direct investment as a means of stimulating economic development in these economies. The arguments in favour of foreign investments are that it provides among other benefits, the required capital for development, facilitates technology transfer, and improve infrastructure development. Foreign direct investment is however criticised for its negative impact on the economies of the third world for a number of reasons. Multinational corporations (MNCs) that account for the highest contributors to FDI through private capital investment are accused of sharp practices that include exploitation, corruption, unethical business practices and environmental degradation. Through their activities, MNC engender loss of sovereignty and policy-making by host economies and loss of control over resources among other negative impacts. One instrument used by Foreign Capital to subjugate developing economies is the control of management of projects and programmes into which investments are made. Management control is therefore a primary objective of investors and this is usually accomplished right from the time agreements are reached between the host states and the investors. The study concluded that more often than not, the implication of management control over investment on developing economies include the desire to recoup capital invested at the shortest possible time, total dependence of the sector on investors for future development, reaping huge profits at the expense of local communities, damaging social networks and instigating political instability by the non-recognition and lack of respect for existing social conditions. Certain measures are therefore inevitable if FDI is to engender sustainable development.

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