Foreign Direct Investment (FDI)

 

FDI or Foreign Direct Investment is basically a controlling stake (ownership) in a commercial enterprise located in a country by an entity based out of another country. This is different from portfolio foreign investment with respect to the element of ‘control’. The latter kind of investment is only an unassertive investment in the securities of a foreign nation like bonds and stocks.

The Financial Times gives typical definitions of ‘control’ as the globally agreed threshold of 10% of the voting shares, however, often this is a cloudy area since even a smaller share would accord control in companies. FDI includes mergers and acquisitions, construction of new facilities, intra-company loans and reinvesting profits from foreign operations.

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