FOREIGN DIRECT INVESTMENT

Foreign Direct Investment (FDI) is the acquisition of an interest in a business by a firm or

an investor based outside of the country. Generally, the word refers to a commercial strategy to
obtain a major stake in or outright purchase a foreign corporation in plan to enlarge its operations
into a new territory. It is not commonly used to refer to an investment in a foreign company's
stock.

LASTING INTEREST AND ELEMENT OF CONTROL

- When an investor secures at least 10% of a company's voting power, a permanent interest
is developed.

METHODS OF FOREIGN DIRECT INVESTMENT

- A domestic investor can acquire voting power in a foreign corporation in a variety of
ways by acquiring voting stock in a foreign company; mergers and acquisitions; joint
ventures with foreign corporation; and starting a subsidiary of a domestic firm in a
foreign country.

ADVANTAGE OF FOREIGN DIRECT INVESTMENT

o Market diversification
o Tax incentives
o Lower labour costs
o Preferential tariffs
o Subsidies

DISADVANTAGE OF FOREIGN DIRECT INVESTMENT

o Displacement of local businesses
o Profit repatriation

TYPES AND EXAMPLE OF FOREIGN DIRECT INVESTMENT

 - Horizontal: When a company spreads its domestic activities to a foreign country, it is
known as internationalization. In this situation, the company engages in the same
activities as before, but in a different country.
- Vertical: By relocating to a different level of the supply chain, a company can expand
into a foreign country. In other words, a company may engage in a variety of activities
outside of its home country, as long as these activities are relevant to the main business.
- Conglomerate: A company buys a completely unrelated company in another country.
- Platform: A company grows into a foreign country, yet the foreign operations' produce is
shipped to a third country.

WRITE THE LIST OF THE COUNTRIES ENGAGE IN FOREIGN DIRECT

INVESTMENT (FDI) WITH ANALYSIS.

According to the World Bank, these are the top ten nations that acquired the most foreign
direct investment in 2016.

1. United States- In 2016, the United Kingdom and Canada received the most foreign direct
investment. The net foreign direct investment reached $479.4 billion.
2. United Kingdom- In 2016, UK reached $299.7 billion in net foreign direct investment.
3. China- In 2016, foreign direct investment in Asia's economic behemoth China totalled
$170.6 billion. Foreign investment in the country has hit a whole high, with roughly
2,500 new foreign-invested firms authorized on average every month.
4. Netherlands- In 2016, the net foreign direct investment of the country received $80.8
billion. As per the Netherlands Foreign Investment Agency, approximately half of the
country's gross domestic product is obtained from overseas trade.
5. Ireland- For the sixth straight year, IBM's 2017 Global Locations Trend study ranked
Ireland as the No. 1 country for high-value foreign investment. The net foreign direct
investment of the country reached $79.2 billion in 2016.
6. Brazil- The country’s President Michel Temer launched an investment partnership
initiative in 2017 to manage $14 billion in infrastructure concessions across motorways,
 ports, trains, and electricity lines that are aimed to support the country become more
appealing to investors. In 2016, the net foreign direct investment of the country reached
$78.9 billion.
7. Singapore- In 2016, the net foreign direct investment of the country received $61.6
billion.
8. Germany- As per Ernst & Young, Germany is especially attractive because to its robust
infrastructure and skilled workers, with the transport and auto industries driving
expansion. In 2016, the net foreign direct investment of the country reached $52.5 billion.
9. India- Canada's investments in real estate and infrastructure have helped India get to be
the world's fastest expanding investment area, according to a KPMG research. India’s net
foreign direct investment reached $44.4 billion in 2016.
10. France- The country’s net foreign direct investment reached $42.3 billion in 2016.