Definition

in its classic definition, is defined as a company from one country making a physical investment into building a factory in another country. The direct investment in buildings, machinery and equipment is in contrast with making a portfolio investment, which is considered an indirect investment. In recent years, given rapid growth and change in global investment patterns, the definition has been broadened to include the acquisition of a lasting management interest in a company or enterprise outside the investing firms home country

Explanation 'Foreign Direct Investment - FDI'

The investing company may make its overseas investment in a number of ways - either by setting up a subsidiary or associate company in the foreign country, by acquiring shares of an overseas company, or through a merger or joint venture. The accepted threshold for a foreign direct investment relationship, as defined by the OECD, 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. An example of foreign direct investment would be an American company taking a majority stake in a company in China. Another example would be a Canadian company setting up a joint venture to develop a mineral deposit in Chile.

What would be some of the basic requirements for companies considering a FDI?

New market access is also another major reason to invest in a foreign country. At some stage, export of product or service reaches a critical mass of amount and cost where foreign production or location begins to be more cost effective. Any decision on investing is thus a combination of a number of key factors including:

Continuous..

assessment of internal resources, competitiveness, market analysis market expectations.

Why is FDI important for any consideration of going global?

The simple answer is that making a direct foreign investment allows companies to accomplish several tasks: Avoiding foreign government pressure for local production. Circumventing trade barriers, hidden and otherwise.

Why is FDI important for any consideration of going global?

Making the move from domestic export sales to a locallybased national sales office. Capability to increase total production capacity. Opportunities for co-production, joint ventures with local partners, joint marketing arrangements, licensing, etc;

The Role of FDI in Economic Development

This is especially applicable for developing economies. During the 1990s, foreign direct investment was one of the major external sources of financing for most countries that were growing economically. It has also been noted that foreign direct investment has helped several countries when they faced economic hardship.

Benefits of Foreign Direct Investment in Economic

There are several benefits of FDI over the economy of the receiving country. These benefits could be classified mainly in four types A.Growth and Employment Productive FDI usually brings long lasting and stable capital flows as they are invested in long term assets. These funds are introduced into a countrys economy contributing to the aggregate demand of the economy, and therefore to the growth of the economy of a country.

Benefits of Foreign Direct Investment in Economic

Companies within the country, due to the competition brought in by FDI, tend to become more productive to effectively counter the threat of the competitor from abroad. Higher productivity of companies contribute to the growth of a countrys economy

Benefits of Foreign Direct Investment in Economic

Employment generation is another positive effect of FDI. As a country becomes more Productive, its competitiveness increases as has been referred by several works, Including Porter in its book The Competitive Advantage of Nations. With increases Competitiveness, employment is created and the introduction to the world economy is More feasible

Benefits of Foreign Direct Investment in Economic

B. Technology and Know How FDI allows for the transfer of technology and specialized knowledge which in turns favors and increase in productivity

C. Access to Goods and Services FDI may bring new goods and services, allowing the receiving country access to these with the benefit of the local consumers.

Benefits of Foreign Direct Investment in Economic

D. Fill the Savings Gap FDI becomes a way to fill the gap between the required funds for growth and the internal savings capacity of a country. assessment of internal resources, competitiveness, market analysis