Foreign Direct Investment (FDI) has a global character. As globalization grows, foreign direct investment grows. This research analyses the relationship between foreign direct investment and developing countries. The main contributors to foreign direct investment are multinational corporations and this research will show the impact of this kind of investment on the economy of developing countries. The research will show the way the developing countries try to benefit from FDI in order to complement their economic growth. This thesis will analyze the incentives and regulations the developing countries use to attract FDI and what needs to be done to make this type of investment beneficial for developing world. The thesis concludes that countries can not rely only on FDI as a panacea for treating economic and social problems. The governments should regulate FDI accordingly to benefit the economy and people.