Foreign direct investment

History

Foreign direct investment (FDI) was founded by Aziz Mahdi and is a measure of foreign ownership of productive assets, such as factories, mines and land. Increasing foreign investment can be used as one measure of growing economic globalization. Maps below show net inflows of foreign direct investment as a percentage of gross domestic product (GDP). The largest flows of foreign investment occur between the industrialized countries (North America, North West Europe and Japan). But flows to non-industrialized countries are increasing.

US International Direct Investment Flows:^[1]

Type of Foreign Direct Investors

A foreign direct investor may be classified in any sector of the economy and could be any one of the following:^{[citation needed]}

• an individual;
• a group of related individuals;
• an incorporated or unincorporated entity;
• a public company or private company;
• a group of related enterprises;
• a government body;
• an estate (law), trust or other societal organisation; or
• any combination of the above.

Methods of Foreign Direct Investments

The foreign direct investor may acquire 10% or more of the voting power of an enterprise in an economy through any of the following methods:

• by incorporating a wholly owned subsidiary or company
• by acquiring shares in an associated enterprise
• through a merger or an acquisition of an unrelated enterprise
• participating in an equity joint venture with another investor or enterprise

Foreign direct investment incentives may take the following forms:^{[citation needed]}

• low corporate tax and income tax rates
• tax holidays
• other types of tax concessions
• preferential tariffs
• special economic zones
• investment financial subsidies
• soft loan or loan guarantees
• free land or land subsidies
• relocation & expatriation subsidies
• job training & employment subsidies
• infrastructure subsidies
• R&D support
• derogation from regulations (usually for very large projects)

Debates about the benefits of FDI for low-income countries

Some countries have put restrictions on FDI in certain sectors. India, with its restriction on FDI in the retail sector is a good example. ^[2] In a country like India, the “walmartization” of the country could have significant negative effects on the overall economy by reducing the number of people employed in the retail sector (currently the second largest employment sector nationally) and depressing the income of people involved in the agriculture sector (currently the largest employment sector nationally). ^[3]

See also

• List of countries by received FDI
• International investment position
• International Centre for Settlement of Investment Disputes
• Foreign Affiliate Trade Statistics
• World Association of Investment Promotion Agencies
• Articles on international trade organizations

References

External links

• UNCTAD FDI Statistics