Essay On Foreign Direct Investment

Foreign direct investment FDI is an investment of a company from one country to another whereby assets are acquired, operations are set up and joint ventures with local firms are made (Financial Times , n.d.). FDI is a risky and more expensive method of venturing globally as compared to licensing and exporting, however it does not stop companies from doing so due to its many advantages. FDI is one of the key drivers in speeding up the development and economic growth in Malaysia. Sound macroeconomic management, presence of a well-functioning financial system and sustained economic growth has made Malaysia an attractive country for FDI. Moreover, FDI plays a crucial role in Malaysia economy as it generates economic growth by increasing capital formation through the expansion of production capacity.

FDI appears when a commonly expanding or growing company is investing to a foreign country. FDI consists of the acquisition or creation of assets (e.g. firm equity, land, houses, oil-drilling rigs and etc.) undertaken by foreigners. Initial investment or ownership of the foreign equity has to be more than 10% but does not need to be a 100%. Anything less than 10% of the ownership will be called portfolio investment. Company which invests in foreign markets become a multinational enterprise (MNE).

Countries would participate in foreign direct investments because it helps in the economic development of the country where the investment is being made. They also engage in FDI to reduce production costs.

Many governments, especially in industrialized and developed nations, pay very close attention to foreign direct investment because the investment flows into and out of their economies can and does have a significant impact.

Foreign Direct Investment refers to the type of investment into a country that is characterized by the inflow of funds from a foreign source that can be in the form of ownership such as stocks, bonds, infrastructural presence, etc. by the element of ‘control’. FDI is defined as the net inflows of investment to acquire a management interest (10 percent or more of voting stock) in an enterprise operating in an economy other than that of the investor.

Foreign direct investment (FDI) can be defined as a process whereby residents of one country (the source country) acquire ownership of assets for the purpose of controlling the production, distributions and other activities of a firm in another country (the host country). FDI also have another definition like ‘an investment that is made to acquire a lasting interest in an enterprise operating in an economy other than that of the investor, the investor’s purpose being to have an effective voice in the management of the enterprise’- International Monetary Fund’s Balance of Payment Manual and ‘ an investment involving a long-term relationship and reflecting a lasting interest and control of a resident entity in one economy (foreign

FDI stands for Foreign Direct Investment ; it is an investment from one country into another (normally by companies rather than governments) that involves establishing operations or acquiring tangible assets, including stakes in other businesses ( Financial Times ) .

Foreign direct investment (FDI) is investment that gains control of the foreign business or assets. It is a method of international expansion that gets a controlling interest in property, assets or companies located in other countries. FDI can also involve a business controlling resources such as mineral deposits, land and other assets in other countries. This form international expansion involves a higher level of commitment by the business because it usually involves a transfer of money, personnel and technology.

FDI is understood as capital investments in real assets (production) in other countries, which participates in the management of the investor.

Investments can be categorized as Foreign Direct Investment (FDI) and Foreign Indirect Investment (FII), where Foreign Direct Investment is venturing into an economic activity outside the economy of the investor. It is referred to as Direct Investment because the investor whether as a person or as a company has a direct long term interest in another country's company either through purchase or building and getting involved in the management and control of the operations. An investment qualifies as an FDI when the investor has acquired the voting rights by obtaining 10% of the issuer's common stock.

FDI through acquisition has been defined as ‘international investment made with the objective of obtaining a lasting interest, by a resident entity in one economy in an enterprise resident in another economy. The lasting interest implies the existence of a long-term relationship between the direct investor and the enterprise and a significant degree of influence on management of the enterprise.’ (OECD, 2015)

Foreign Direct Investment can have many problems and benefits, a problem with many FDI’s is that its done in the deveoped countries rather than the countries that need FDI plan such as Nigera, Cameroon and Somalia meanwhile when an FDI project is planned in a country and on a large scale then its very benefecial for the countries economy According to data.worldbank.org Foriegn direct investment means that the invester

As shown in the Figure 1, the UAE has jumped to the 11th position in 2014 against the 13th in 2013 and the 15th in 2012. The United Arab Emirates reported a $9.6 billion inflow of FDI in 2012, up from $7.7 billion the year before. (A.T. Kearney Foreign Direct Investment Confidence Index, 2014. p. 20). Besides Dubai, the foreign direct investment policies in the UAE have to be applied on the national scale and would be preferably to open more industries to the foreign investors. As matter of fact, the World Expo 2020 which will be staged in the UAE represents an opportunity to revise the foreign ownership policies in order to bring more investments in the country.

Economists believe that Foreign Direct Investments is an essential part of economic evolution in every country. There are many academic papers that attempt to assess FDI aspects. Despite many researchers have tried to give an accurate explanation to FDI, there is no comprehensively approved theory. FDI motivations have been mainly researched by John Dunning, Stephen Hymer, Raymond Vernon, etc.

Foreign Investment is direct method to have trade in other country in this a company invest a huge amount of money in selected country. In foreign investment company is going to establish new enterprise own its own in totally new environment. Company have to arrange every single thing like plant, machinery, employees and authorise dealer for marketing the products.