A Mumbai-based research institute namely RUPE (Research Unit for Political Economy) has pointed out that foreign direct investment (FDI) is far more expensive than debt. The study rightly observed that "70 of these 100 companies studied contribute a net foreign exchange outflow which exceeds their foreign exchange earnings". It is further pointed out that MNCs/TNCs always drained forex rapidly out of the host nation. Expensive and badly needed forex reserves is always lost in a single year due to the operations of a typical MNC/TNC than its whole foreign holdings which alwayscontributes a one time inflow of capital.

It is also believed that what is against the concept of short-term capital flows which lead to destabilisation effect to weak nations is also true in case of FDI. If FDI flows are not properly managed then they could destabilise weak host nation.

A foreign controlled company always loses every year, by way of foreign exchange outflows due to dividends, royalties and imports and 2/3rd of it is the value of their foreign equity as well as foreign earnings to date. It is also true that so many foreign controlled companies did send more than double their foreign equity in terms of foreign exchange. This all lead to heavy pressure on country's forex reserves.

It is also observed that in case of many foreign controlled companies more than 3/4th of the foreign equity is made up of bonus shares to the foreign promoters. But by this act, a MNC's total foreign exchange outgo did exceed by 1988 its inflow by 100 times the original investment.

According to the most latestWorld Investment Report, of UNCTAD has rightly pointed out that "large repatriation of profits by MNCs and payments of royalties and imports, played a significant part in the balance of payments crisis in Asian Tigers". It is also believed that much of the investment in the developing world did come on account of privatisation not through FDI flows. During the year 1996, total investment flows to Latin American and Caribbean stood at US$39 billion and 50 per cent of Western European investment in the said regions has been through privatisation. Similarly, during the year 1996, there had been a decline in the investment flow to Central and Eastern Europe i.e from a level of US $14 billion to US $12 billion and this considerable decrease has been due to lesser degree of privatisation in major nations namely Hungry and Czechoslovakia.

According to another study, "with a substantial inflow of FDI amounted to US $81 billion in the year of 1996, as much as 2/3rd of the same did receive by South and SE Asia. Butas studies have shown the highly negative impact in balance of payments of such FDI for these countries. Large and persistent current account deficits were registered in countries like Malaysia and Thailand."

Very recently, another thought provoking study conducted by the UK's two most distinguished economists has pointed out that out of six selected sample countries namely--Colombia, India, the Islamic Republic of Iran, Jamaica, Kenya and Malaysia, except for Kenya, the overall effect on the BOP was on the negative side. Added to this, they further observed that the there has been purely financial contribution of FDI and this contribution appeared to be negligible or negative.

Likewise, another very vital and fruit-bearing study completed by the UN Centre on Transnational Corporation has also examined the direct effect of TNCs on the BOP of Mexico, one of major destinations in the world in general and developing world in particular. According to the study" the current account deficit for foreignaffiliates represented 47 per cent of the country's total current account deficit".

There are two most latest cases to be cited in this regard. First is of Malaysia and the second is of Thailand. In case of Malaysia, FDI inflows and outflows have been responsible for the dramatic current account deficits which is of alarming proposition. According to a survey of 18 largest foreign affiliates in electronic sector of Malaysia, the value of imports (materials and components) did constitute as high as figure of 78 per cent of their total inputs and this very percentage has been higher than the average for all manufacturing industries. While on the other side of it, local companies have contributed positively to the current of Malaysian economy.

With regard to Thailand, FDI flows have also played an increasing role in its large trade deficit which also constitutes the major chunk of the current account deficit. Added to this, payments of investment income and imports have added fuel to fire as they stood morethan the rise in FDI.

From foregoing discussion it is very clear that FDI is a "double edged weapon" and it is not the only and rightly solution to balance of payments crisis. It is safely concluded that the cost of FDI flows has been on the very high side or much more as in case of other sources of money. Hence, the need of the hour is to adopt more cautious policy in regard to FDI flows by the host nations.