Foreign Direct Investment: An Overview

Essays - Foreign Direct Investment (FDI)
Foreign Direct Investment (FDI)

Outline:

1. What is Foreign Direct Investment?
2. Understanding Foreign Direct Investment
3. Determinants of FDI
4. Basic types of FDI
5. FDI based on the motives of the investing firm
6. Importance of FDI
7. Policies to attract Foreign Direct Investment
8. History of FDI
9. Foreign Direct Investment in Asia
10. Foreign Direct Investment in Pakistan
11. Economic policies attracting FDI in Pakistan
12. Foreign Direct Investment and Poverty Reduction
13. Conclusion

What is Foreign Direct Investment?

Foreign direct investment (FDI) is defined as a long-term investment by a foreign direct investor in an enterprise resident in an economy other than that in which the foreign direct investor is based. The FDI relationship consists of a parent enterprise and a foreign affiliate which together form a transnational corporation (TNC). In order to qualify as FDI the investment must afford the parent enterprise control over its foreign affiliate. The UN defines control in this case as owning 10% or more of the ordinary shares or voting power of an incorporated firm or its equivalent for an unincorporated firm.

Understanding Foreign Direct Investment

Foreign direct investment (FDI) plays an extraordinary and growing role in global business. It can provide a firm with new markets and marketing channels, cheaper production facilities, access to new technology, products, skills and financing. For a host country or the foreign firm which receives the investment, it can provide a source of new technologies, capital, processes, products, organizational technologies and management skills, and as such can provide a strong impetus to economic development. Foreign direct investment, in its classic definition, is defined as a company from one country making a physical investment into building a factory in another country. In recent years, given rapid growth and change in global