Fdi ( Foreign Direct Investment )

3180 Words Aug 25th, 2014 13 Pages
Chapter Two – Literature review
2.1 The overview of FDI (Foreign Direct Investment)
FDI is where the MNE invests directly in production or other facilities over which it has effective control in a host economy (j &t). According to Pollan (), the definition of the terms “investment” is highly significant to Foreign Direct Investment, which can be typical comprehend as the conveyance of capital to a country. Investment can be defined as money committed or property acquired in order to gain profitable returns, as interest, future income or appreciation in value (business dictionary, 2014). The commonest definition used to understand the idea of FDI is the definition provided by International Monetary Fund’s (IMF). The IMF definition of FDI
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Trends- The only reasonably detailed and dependable time series data on the scheme of affairs of multinational enterprises is that on their accumulated FDI stock and annual investment flows (dunning, 2008). The past three decades (30 years) have seen remarkable increase in both the flow and stock of FDI in the world economy. The average yearly outflow of FDI catapulted from $25 billion in 1975 to a record $1.8 trillion in 2007. However, FDI outflows peaked at $1.1 trillion in 2009 and 2010 in the wake of the global crisis, although they were forecasted to recover in 2011. In general, however, over the past three decades (30 years) the flow of FDI has increased faster than the growth in world trade and world output. FDI has increased more speedily than world trade and world output due to several reasons, such as, attributing much of the growth in FDI to driven political and economic reforms that have been occurring in many of the world’s developing nations (hill, 2013). source- Since the World War II, the United States has been the largest source country for FDI, a rank it retained during the late 1990s and early 2000s. Other significant source countries include the United Kingdom, France, Germany, the Netherlands and Japan. These six countries collectively account for 60% of all FDI outflows for 1998-2010 (hill, 2013).
2.1.1 Forms of FDI
According to Paul (), the

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