Foreign Direct Investment ( Fdi )

1669 Words May 1st, 2016 7 Pages
In today’s increasingly globally integrated business world, foreign direct investment (FDI) “provides a means for creating direct, established and long-lasting links between economies,” according to the 2008 Organization for Economic Co-Operation and Development Benchmark Definition of Foreign Direct Investment (OECD, 2008, p. 14). Foreign direct investment (FDI) is defined as “an investment made to acquire lasting interest in enterprises operating outside of the economy of the investor,” by the United Nations Conference on Trade and Development (UNCTAD).9
FDI is further defined as “a category of cross-border investment made by a resident in one economy (the direct investor) with the objective of establishing a lasting interest in an enterprise (the direct investment enterprise) that is resident in an economy other than that of the direct investor” (OECD, 2008, p. 17).
The motivation of the direct investor is to create a “strategic long-term relationship” with the direct investment enterprise in order to gain influence over the management of the direct investment enterprise (OECD, 2008). The direct investor must own 10 percent or more of the voting power of the direct investment enterprise to be classified as a “lasting interest” (OECD, 2008). Thus, the objectives behind foreign direct investment differ from foreign portfolio investment, as foreign portfolio investors generally do not expect to gain significant control or influence over the management of the assets they…

More about Foreign Direct Investment ( Fdi )

Open Document