Foreign direct investment (FDI) is direct investment into production in a country by a company in another country, either by buying a company in the target country or by expanding operations of an existing business in that country. Foreign direct investment is done for many reasons including to take advantage of cheaper wages,and/or for special investment privileges such as tax exemptions offered by the country as an incentive to gain tariff-free access to the markets of the country or the region. Foreign direct investment is in contrast to portfolio investment which is a passive investment in the securities of another country such as stocks and bonds. FDI have both merits and demerits for any country.
As a part of the national accounts of a country, and in regard to the national income equation Y=C+I+G+(X-M), I is investment plus foreign investment, FDI refers to the net inflows of investment(inflow minus outflow) to acquire a lasting management interest (10 percent or more of voting stock) in an enterprise operating in an economy other than that of the investor. It is the sum of equity capital, other long-term capital, and short-term capital as shown the balance of payments. It usually involves participation in management, joint-venture, transfer of technology and expertise. There are two types of FDI: inward and outward, resulting in a net FDI inflow (positive or negative) and "stock of foreign direct investment", which is the cumulative number for a given period. Direct investment excludes investment through purchase of shares. FDI is one example of international factor movements.
Read more about Foreign Direct Investment: Types, Methods, Country Attractiveness, Foreign Direct Investment and The Developing World
Famous quotes containing the words foreign, direct and/or investment:
“You can’t appreciate home till you’ve left it, money till it’s spent, your wife till she’s joined a woman’s club, nor Old Glory till you see it hanging on a broomstick on the shanty of a consul in a foreign town.”
—O. Henry [William Sydney Porter] (1862–1910)
“The frequency of personal questions grows in direct proportion to your increasing girth. . . . No one would ask a man such a personally invasive question as “Is your wife having natural childbirth or is she planning to be knocked out?” But someone might ask that of you. No matter how much you wish for privacy, your pregnancy is a public event to which everyone feels invited.”
—Jean Marzollo (20th century)
“There is something fascinating about science. One gets such wholesale returns of conjecture out of such a trifling investment of fact.”
—Mark Twain [Samuel Langhorne Clemens] (1835–1910)