Final answer:
Foreign investors play a crucial role in developing countries by contributing to their economies, but foreign aid isn't always sufficient for growth.
The effect of foreign aid on economic development is debated, while foreign investment is sought after for substantive benefits despite potential risks.
Step-by-step explanation:
The activities of foreign investors in developing countries are vital as they contribute significantly to the income of these economies. However, generating sufficient investments for capital accumulation necessary to invest in physical and human capital can be a challenge.
Foreign aid and external investment are often not enough for this purpose. Additionally, the impact of foreign aid on economic growth is a contentious issue; while it can provide some benefits, it is not always a direct contributor to economic growth. Countries, especially low-income ones,
seek foreign investment to help develop their economies, and policies against financial investment from abroad could block potentially substantial economic benefits.
Despite the potential advantages, policies that encourage international financial investment must be balanced against possible harms so as not to rule out the significant benefits foreign investments can deliver to developing economies.