| Foreign Direct Investment | | | | investment rules, as well as operational flexibility |
| Foreign direct investment is defined as a company | | | | have all contributed to help increase the inflow of |
| from one country, which makes a physical | | | | Foreign Direct Investment. Foreign Direct |
| investment into constructing a factory in another | | | | Investment is made of any form of investment |
| one. The company can also make investments to | | | | that can earn interest in enterprises functioning |
| acquire lasting interest in enterprises that operate | | | | outside the investor’s territory. |
| outside the economy it invested in. The link with | | | | FDIs also require a relationship between a parent |
| the FDI is made of a parent enterprise and a | | | | company and its foreign subsidiary. So that an |
| foreign affiliate, forming together a corporation, | | | | investment can be seen as an FDI, the parent |
| known as multinational. | | | | company has to have a minimum 10% of the |
| To qualify as FDI, this investment must also allow | | | | ordinary shares of the foreign affiliates it is doing |
| and afford the control of the parent enterprise | | | | business with. At the same time, the investing |
| over the foreign affiliate. This kind of control is | | | | company can qualify for an FDI as long as it has |
| defined by the UN as owning 10% or more of the | | | | the voting power in a business enterprise that |
| shares or voting power of a firm, which is | | | | operates in a foreign country. |
| incorporated, or the exact equivalent for an | | | | FDIs can be classified into two types, based on |
| unincorporated one. In this context, ownership | | | | the types of restrictions imposed, and the |
| shares that are lower are known to be portfolio | | | | prerequisites for these investments, namely |
| investment. | | | | outward FDIs and inward FDIs. |
| Global FDI was dominated by the United States in | | | | The government against all types of risks ensures |
| the postwar period, accounting for about | | | | the first type; it is subject to tax, and the risk |
| three-quarters of the new FDI, reinvested profits | | | | coverage provided to the domestic industries |
| included. Since that time, the 60s, FDI has | | | | granted to the local companies stand in the way |
| continued to spread and eventually became a | | | | of the first type of FDIs, also bearing the name |
| global phenomenon. Global economy now has an | | | | of “direct investments abroad. However, |
| ever growing, increasing in importance, with FDI | | | | the inward FDIs is more encouraged, as they |
| stock constituting over 20 percent of global Gross | | | | include interest loans, tax breaks, grants, subsidies, |
| Domestic Product. | | | | as well as the removal of restrictions and |
| Continuous economic growth, de-regulation, liberal | | | | limitations. |