This article published on January 18th, 2018 is about Foreign Direct Investment (FDI) into Rwanda. FDI is described as when a firm in one country invests in another country and attains direct control. Rwanda is categorized as a Least Economically Developed Country (LEDC); “a country that is considered to be lacking in terms of its economy, infrastructure, and industrial base.”(Investopedia, 2017). Therefore, LEDCs enable Multinational Corporations (MNCs) to invest in their country to achieve economic growth. MNCs are corporate organizations that control the production of goods and services in two or more countries different from their home country. As mentioned before, FDI can result in economic growth, seen in the diagram below.Figure 1: Production Possibility Curve (PPC) By enabling FDI into Rwanda, there is an increase in investments in the country as mentioned in the article: “Rwanda targets to reach upper-middle-income status by 2035 and has boosted investment opportunities.” (XinhuaNet, 2018). Investments associate with the act of spending on capital goods and hence, increasing the quantity of the capital goods. Since capital is one of the factors of production, the potential output rises leading to an increase in economic growth.However, according to the theory, FDI often produces negative externalities of production, as shown in the diagram below. Figure 2: Market Failure DiagramFDI can cause damage to the health, hence decreasing the country’s standard of living. Since MSC is greater than MPC, this shows that there are negative externalities of production. The social optimal point is defined by the points of P1 and Pe, where MSC is equal to MSB. In addition, as price and quantity intersect, market equilibrium is achieved and it is where MPC equals MPB. By observing the graph, we can deduct that there is an overproduction of the good, since the market equilibrium is greater than the social optimal point, resulting in a case of market failure. There is also welfare loss since the MSC is greater than the MSB between Qe and Q1. There are many advantages present when enabling FDI into Rwanda. Firstly, there is an increase in economic growth, as mentioned before. By increasing economic growth, there is an increase in income and hence, increasing the access of goods and services. In result, this increases the country’s standard of living. Secondly, there is an increase in employment opportunities. As stated in the article, “38,261 jobs were created last year in the sectors of infrastructure, services, manufacturing, tourism, construction and real estate, agriculture, ICT and mining,”(XinhuaNet, 2018). This causes people’s income to increase, allowing them to break out from the poverty cycle. Poverty cycle is a situation in which due to low income, they have low investments in sectors of health and education, which causes low productivity and finally, prompting back to low income. Thirdly, there is an increase in tax revenue. This enables the host country’s government to increase spending on merit goods, for example, health and education. Again, leading to an increase in the country’s standard of living.However, there are also disadvantages present when allowing FDI into Rwanda. Firstly, there are negative externalities of production, as mentioned before. This causes damage to the society’s health and hence, decreasing the country’s standard of living. Secondly, profits are in most cases, repatriated (sent abroad). In other words, when the MNCs make the profits in the country they invested in, they send it back to their own country. This act has no benefits to the locals of the country since it doesn’t increase their income, strikingly. Thirdly, it is vulnerable to external shocks meaning that if a change occurs in the global economy, an outflow of FDI can take place. Due to external shocks such as a recession, MNCS can extract money from the country to their home country causing the rate of unemployment to increase. In conclusion, by enabling FDI into Rwanda there are short-term advantages comprehending an increase in economic growth, employment rate and tax revenue. On the other hand, it doesn’t have a sustainable system of development since it causes damage to the health and environment of the country, profits are repatriated and it is vulnerable to external shocks. Therefore, in order to achieve economic growth, LDCs should not only rely on FDI.