Essay Foreign Direct Investment ( Fdi )

891 Words Apr 15th, 2015 4 Pages
Foreign Direct Investment (FDI) is defined as investment made by a company or entity based in one country, into a company or entity based in another country. FDI is substantially different from indirect investment where foreign institutions invest in equities listed on a nation 's stock exchange. Entities making direct investments typically have a significant degree of influence and control over the company into which the investment is made. Open economies with skilled workforces and good growth prospects tend to attract larger amounts of foreign direct investment than closed, highly regulated economies.
The investing company can make these investments in the following ways –
• By setting up a subsidiary or associate company in the foreign country
• By acquiring shares of an overseas company
• Through a merger or joint venture
As defined by the OECD, the threshold limit for FDI is 10%. That is, the foreign investor must own at least 10% or more of the voting stock or ordinary shares of the investee company.
A new report by the United Nations Conference on Trade and Development (UNCTAD) has shown that FDI inflows grew to $1.45tn in 2013. It became $1.6tn in 2014, is expected to grow to $1.75tn in 2015 and $1.85tn in 2016. FDI net inflow is the value of inward direct investment made by non-resident investors in an economy. FDI net outflow is the value of outward direct investment made by the residents of an economy to foreign economies.
FDI inflows to developing countries…

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