Foreign direct investment

A foreign direct investment (FDI) is an investment in the form of a controlling ownership in a business in one country by an entity based in another country.[1] It is thus distinguished from a foreign portfolio investment by a notion of direct control.

The origin of the investment does not impact the definition, as an FDI: the investment may be made either "inorganically" by buying a company in the target country or "organically" by expanding the operations of an existing business in that country.


Broadly, foreign direct investment includes "mergers and acquisitions, building new facilities, reinvesting profits earned from overseas operations, and intra company loans". In a narrow sense, foreign direct investment refers just to building new facility, and a lasting management interest (10 percent or more of voting stock) in an enterprise operating in an economy other than that of the investor.[2] FDI is the sum of equity capital, long-term capital, and short-term capital as shown in the balance of payments. FDI usually involves participation in management, joint-venture, transfer of technology and expertise. Stock of FDI is the net (i.e., outward FDI minus inward FDI) cumulative FDI for any given period. Direct investment excludes investment through purchase of shares.[3]

FDI, a subset of international factor movements, is characterized by controlling ownership of a business enterprise in one country by an entity based in another country. Foreign direct investment is distinguished from foreign portfolio investment, a passive investment in the securities of another country such as public stocks and bonds, by the element of "control".[1] According to the Financial Times, "Standard definitions of control use the internationally agreed 10 percent threshold of voting shares, but this is a grey area as often a smaller block of shares will give control in widely held companies. Moreover, control of technology, management, even crucial inputs can confer de facto control."[1]

Theoretical background

According to Grazia Ietto-Gillies (2012),[4] prior to Stephen Hymer’s theory regarding direct investment in the 1960s, the reasons behind Foreign Direct Investment and Multinational Corporations were explained by neoclassical economics based on macro economic principles. These theories were based on the classical theory of trade in which the motive behind trade was a result of the difference in the costs of production of goods between two countries, focusing on the low cost of production as a motive for a firm’s foreign activity. For example, Joe S. Bain only explained the internationalization challenge through three main principles: absolute cost advantages, product differentiation advantages and economies of scale. Furthermore, the neoclassical theories were created under the assumption of the existence of perfect competition. Intrigued by the motivations behind large foreign investments made by corporations from the United States of America, Hymer developed a framework that went beyond the existing theories, explaining why this phenomenon occurred, since he considered that the previously mentioned theories could not explain foreign investment and its motivations.

Facing the challenges of his predecessors, Hymer focused his theory on filling the gaps regarding international investment. The theory proposed by the author approaches international investment from a different and more firm-specific point of view. As opposed to traditional macroeconomics-based theories of investment, Hymer states that there is a difference between mere capital investment, otherwise known as portfolio investment, and direct investment. The difference between the two, which will become the cornerstone of his whole theoretical framework, is the issue of control, meaning that with direct investment firms are able to obtain a greater level of control than with portfolio investment. Furthermore, Hymer proceeds to criticize the neoclassical theories, stating that the theory of capital movements cannot explain international production. Moreover, he clarifies that FDI is not necessarily a movement of funds from a home country to a host country, and that it is concentrated on particular industries within many countries. In contrast, if interest rates were the main motive for international investment, FDI would include many industries within fewer countries.

Another observation made by Hymer went against what was maintained by the neoclassical theories: foreign direct investment is not limited to investment of excess profits abroad. In fact, foreign direct investment can be financed through loans obtained in the host country, payments in exchange for equity (patents, technology, machinery etc.), and other methods. The main determinants of FDI is side as well as growth prospectus of the economy of the country when FDI is made. Hymer proposed some more determinants of FDI due to criticisms, along with assuming market and imperfections. These are as follows:

  1. Firm-specific advantages: Once domestic investment was exhausted, a firm could exploit its advantages linked to market imperfections, which could provide the firm with market power and competitive advantage. Further studies attempted to explain how firms could monetize these advantages in the form of licenses.
  2. Removal of conflicts: conflict arises if a firm is already operating in foreign market or looking to expand its operations within the same market. He proposes that the solution for this hurdle arose in the form of collusion, sharing the market with rivals or attempting to acquire a direct control of production. However, it must be taken into account that a reduction in conflict through acquisition of control of operations will increase the market imperfections.
  3. Propensity to formulate an internationalization strategy to mitigate risk: According to his position, firms are characterized with 3 levels of decision making: the day to day supervision, management decision coordination and long term strategy planning and decision making. The extent to which a company can mitigate risk depends on how well a firm can formulate an internationalization strategy taking these levels of decision into account.

Hymer's importance in the field of International Business and Foreign Direct Investment stems from him being the first to theorize about the existence of Multinational Enterprises (MNE) and the reasons behind Foreign Direct Investment (FDI) beyond macroeconomic principles, his influence on later scholars and theories in International Business, such as the OLI (Ownership, Location and Internationalization) theory by John Dunning and Christos Pitelis which focuses more on transaction costs. Moreover, “the efficiency-value creation component of FDI and MNE activity was further strengthened by two other major scholarly developments in the 1990s: the resource-based (RBV) and evolutionary theories" (Dunning & Pitelis, 2008) [5] In addition, some of his predictions later materialized, for example the power of supranational bodies such as IMF or the World Bank that increases inequalities (Dunning & Piletis, 2008).

Types of FDI

  1. Horizontal FDI arises when a firm duplicates its home country-based activities at the same value chain stage in a host country through FDI.[6]
  2. Platform FDI Foreign direct investment from a source country into a destination country for the purpose of exporting to a third country.
  3. Vertical FDI takes place when a firm through FDI moves upstream or downstream in different value chains i.e., when firms perform value-adding activities stage by stage in a vertical fashion in a host country.[6]


The foreign direct investor may acquire voting power of an enterprise in an economy through any of the following methods:

  • by incorporating a wholly owned subsidiary or company anywhere
  • by acquiring shares in an associated enterprise
  • through a merger or an acquisition of an unrelated enterprise
  • participating in an equity joint venture with another investor or enterprise[7]

Forms of FDI incentives

Foreign direct investment incentives may take the following forms:[8]

Governmental Investment Promotion Agencies (IPAs) use various marketing strategies inspired by the private sector to try and attract inward FDI, including diaspora marketing.

  • by excluding the internal investment to get a profited downstream.

Importance and barriers to FDI

The rapid growth of world population since 1950 has occurred mostly in developing countries. This growth has been matched by more rapid increases in gross domestic product, and thus income per capita has increased in most countries around the world since 1950.[10]

An increase in FDI may be associated with improved economic growth due to the influx of capital and increased tax revenues for the host country. Besides, the trade regime of the host country is named as a important factor for the investor's decision-making. Host countries often try to channel FDI investment into new infrastructure and other projects to boost development. Greater competition from new companies can lead to productivity gains and greater efficiency in the host country and it has been suggested that the application of a foreign entity’s policies to a domestic subsidiary may improve corporate governance standards. Furthermore, foreign investment can result in the transfer of soft skills through training and job creation, the availability of more advanced technology for the domestic market and access to research and development resources.[11] The local population may benefit from the employment opportunities created by new businesses.[12] In many instances, the investing company is simply transferring its older production capacity and machines, which might still be appealing to the host country because of technological lags or under-development, in order to avoid competition against its own products by the host country/company.

Developing world

A 2010 meta-analysis of the effects of foreign direct investment (FDI) on local firms in developing and transition countries suggests that foreign investment robustly increases local productivity growth. [13] The Commitment to Development Index ranks the "development-friendliness" of rich country investment policies.


FDI in China, also known as RFDI (renminbi foreign direct investment), has increased considerably in the last decade, reaching $19.1 billion in the first six months of 2012, making China the largest recipient of foreign direct investment and topping the United States which had $17.4 billion of FDI.[14] In 2013 the FDI flow into China was $24.1 billion, resulting in a 34.7% market share of FDI into the Asia-Pacific region. By contrast, FDI out of China in 2013 was $8.97 billion, 10.7% of the Asia-Pacific share.[15]

During the global financial crisis FDI fell by over one-third in 2009 but rebounded in 2010.[16]

FDI into the Chinese mainland maintained steady growth in 2015 despite the economic slowdown in the world’s second-largest economy. FDI, which excludes investment in the financial sector, rose 6.4 percent year on year to $126.27 billion in 2015.[17]

During the first nine months of 2016, China reportedly surpassed the US to become the world’s largest assets acquirer, measured by the value of corporate takeovers. As part of the transition by Chinese investors from an interest in developing economies to high-income economies, Europe has become an important destination for Chinese outward FDI. In 2014 and 2015, the EU was estimated to be the largest market for Chinese acquisitions, in terms of value.[18]

The rapid increase in Chinese takeovers of European companies has fueled concerns among political observers and policymakers over a wide range of issues. These issues include potential negative strategic implications for individual EU member states and the EU as a whole, links between the Chinese Communist Party and the investing enterprises, and the lack of reciprocity in terms of limited access for European investors to the Chinese market.[18] [2]

Similarly, concerns among low-income households within Australia have prompted several non formal inquiries into direct foreign investment activities from china. As a result numerous Australian political representatives have been investigated, Sam Dastyari[19] has resigned as a result.[20]


Foreign investment was introduced in 1991 under Foreign Exchange Management Act (FEMA), driven by then finance minister Manmohan Singh. As Singh subsequently became the prime minister, this has been one of his top political problems, even in the current times.[21][22] India disallowed overseas corporate bodies (OCB) to invest in India.[23] India imposes cap on equity holding by foreign investors in various sectors, current FDI in aviation and insurance sectors is limited to a maximum of 49%.[24][25]

Starting from a baseline of less than $1 billion in 1990, a 2012 UNCTAD survey projected India as the second most important FDI destination (after China) for transnational corporations during 2010–2012. As per the data, the sectors that attracted higher inflows were services, telecommunication, construction activities and computer software and hardware. Mauritius, Singapore, US and UK were among the leading sources of FDI. Based on UNCTAD data FDI flows were $10.4 billion, a drop of 43% from the first half of the last year.[26]

Nine from 10 largest foreign companies investing in India(from April 2000- January 2011) are based in Mauritius .[27] List of the ten largest foreign companies investing in India (from April 2000- January 2011) are as follows [27] --

  1. TMI Mauritius Ltd. - Rs 7200 crore/$1600 million
  2. Cairn UK Holding - Rs6666 crores/$1492 million
  3. Oracle Global (Mauritius) Ltd. - Rs 4805 crore/$1083 million
  4. Mauritius Debt Management Ltd.- Rs 3800 crore/$956 million
  5. Vodafone Mauritius Ltd. – Rs 4000 crore/$801 million
  6. Etisalat Mauritius Ltd. – Rs 3228 crore
  7. CMP Asia Ltd. – Rs 2638.25 crore/$653.74 million
  8. Oracle Global Mauritius Ltd. – Rs 2575.88 crore / $563.94 million
  9. Merrill Lynch(Mauritius) Ltd. – Rs 2230.02 crore / $483.55 million
  10. Name of the company not given (but the Indian company which got the FDI is Dhabol Power company Ltd.)

In 2015, India emerged as top FDI destination surpassing China and the US. India attracted FDI of $31 billion compared to $28 billion and $27 billion of China and the US respectively.[28][29] India received $63 billion in FDI in 2015.[30] India also allowed 100% FDI in many sectors during 2016.

United States

Broadly speaking, the United States has a fundamentally "open economy" and low barriers to FDI.[31]

U.S. FDI totaled $194[32] Billion in 2010. 84% of FDI in the United States in 2010 came from or through eight countries: Switzerland, the United Kingdom, Japan, France, Germany, Luxembourg, the Netherlands, and Canada.[33] A major source of investment is real estate; the foreign investment in this area totaled $92.2 billion in 2013,[34] under various forms of purchase structures (considering the U.S. taxation and residency laws).

A 2008 study by the Federal Reserve Bank of San Francisco indicated that foreigners hold greater shares of their investment portfolios in the United States if their own countries have less developed financial markets, an effect whose magnitude decreases with income per capita. Countries with fewer capital controls and greater trade with the United States also invest more in U.S. equity and bond markets.[35]

White House data reported in 2011 found that a total of 5.7 million workers were employed at facilities highly dependent on foreign direct investors. Thus, about 13% of the American manufacturing workforce depended on such investments. The average pay of said jobs was found as around $70,000 per worker, over 30% higher than the average pay across the entire U.S. workforce.[31]

President Barack Obama said in 2012, "In a global economy, the United States faces increasing competition for the jobs and industries of the future. Taking steps to ensure that we remain the destination of choice for investors around the world will help us win that competition and bring prosperity to our people."[31]

In September 2013, the United States House of Representatives voted to pass the Global Investment in American Jobs Act of 2013 (H.R. 2052; 113th Congress), a bill which would direct the United States Department of Commerce to "conduct a review of the global competitiveness of the United States in attracting foreign direct investment".[36] Supporters of the bill argued that increased foreign direct investment would help job creation in the United States.[37]


Foreign direct investment by country[38] and by industry[39] are tracked by Statistics Canada. Foreign direct investment accounted for CAD$634 billion in 2012, eclipsing the United States in this economic measure. Global FDI inflows and outflows are tabulated by Statistics Canada.[40]

United Kingdom

The UK has a very free market economy and is open to foreign investment. Prime Minister Theresa May has sought investment from emerging markets and from the Far East in particular and some of Britain's largest infrastructure including energy and skyscrapers such as The Shard have been built with foreign investment.

Russian Federation

  • History of Foreign Investment Law

In 1991,[41] for the first time, Russia regulated the form, range and favorable policy of FDI in Russia.

In 1994,[41] a consulting council of FDI was an established in Russia, which was responsible for setting tax rate and policies for exchange rate, improving investment environment, mediating relationship between central and local government, researching and improving images of FDI work, and increasing the right and responsibility of Ministry of Economic in appealing FDI and enforcing all kinds of policies.

In 1997,[41] Russia starts to enact policies appealing for FDI on particular industries, for example, fossil fuel, gas, woods, transportation, food reprocessing, etc.

In 1999,[41] Russia announced a law named 'FDI of the Russian Federation', which aimed at providing a basic guarantee for foreign investors on investing, running business, earnings.

In 2008,[41] Russia banned FDI on strategic industries, such as military defense and country safety.

In 2014,[42] president Putin announced that once abroad Russian investment inflows legally, it would not be checked by tax or law sector. This is a favorable policy of Putin to appeal Russian investment to come back.

  • Structure of foreign investment in Russia[43]
  1. Direct investment: Investing directly with cash. Basically, investment more than 10% of the item is called Direct investment.
  2. Portfolio investment: Investing indirectly with company loans, financial loans, stocks, etc. Basically, investment less than 10% of the item is called Portfolio investment.
  3. Other investment: Except for direct and portfolio investment, including international assistance and loans for original country.
FDI of RF 1994-2012
Industry of FDI in Russian Federation
Main item of inflow investment in Russian Federation

See also


  1. ^ a b c "Foreign Direct Investment Definition from Financial Times Lexicon".
  2. ^ "Foreign direct investment, net inflows (BoP, current US$) | Data | Table". Retrieved 17 November 2012.
  3. ^ "CIA - The World Factbook". Retrieved 17 November 2012.
  4. ^ Ietto-Gillies, Grazia (2012) Transnational corporations and international production: Concepts, Theories and Effects. Second Edition. Edward Elgar: Cheltenham, UK.
  5. ^ Dunning, John & Pitelis, C.N. (2008). Stephen Hymer’s contribution to international business scholarship: and assessment and extension. Journal of International Business Studies, 39 (1), pp. 167-173
  6. ^ a b "What is Foreign Direct Investment, Horizontal and Vertical « Knowledge Base". Retrieved 17 November 2012.
  7. ^ Bhattacharyya, Srijanee (November 2012). "Legal regimes governing Foreign Direct Investment (FDI) in host countries" (PDF). Advocates for International Development. Archived from the original (PDF) on 21 September 2013. Retrieved 21 August 2013.
  8. ^ U.S. States regularly offer tax incentives to inbound investors. See, for example, an excellent summary, written by Sidney Silhan, of state tax incentives offered to FDI businesses at: BNA Portfolio 6580, U.S. Inbound Business Tax Planning, at A-71.
  9. ^
  10. ^ James, Spencer L; Gubbins, Paul; Murray, Christopher JL; Gakidou, Emmanuela (30 July 2012). "Developing a comprehensive time series of GDP per capita for 210 countries from 1950 to 2015". Population Health Metrics. 10 (1). doi:10.1186/1478-7954-10-12.
  11. ^ UNCTAD (2010). "Foreign direct investment, the transfer and diffusion of technology, and sustainable development (2010)" (PDF).
  12. ^ Slaughter And May (2012). "Legal Regimes Governing Foreign Direct Investment (FDI) In Host Countries" (PDF). Advocates for International Development. Archived from the original (PDF) on 21 September 2013. Retrieved 21 August 2013.
  13. ^ Tomas Havranek & Zuzana Irsova (30 April 2011). "Which Foreigners are Worth Wooing? A Meta-Analysis of Vertical Spillovers from FDI". Retrieved 17 September 2012.
  14. ^ "China tops U.S. as investment target in 1st half 2012: U.N. agency". Reuters. 24 October 2012. Retrieved 24 October 2012.
  15. ^ "The fDi Report 2014 - Asia Pacific". fDi Magazine. 25 June 2014. Retrieved 17 July 2014.
  16. ^ "FDI by Country". Greyhill Advisors. Retrieved 15 November 2011.
  17. ^ "China FDI inflow rises 6.4% in 2015".
  18. ^ a b Hellström, Jerker (2016). "China's Acquisitions in Europe: European Perceptions of Chinese Investments and their Strategic Implications" – via Swedish Defence Research Agency.
  19. ^ "Sam Dastyari resigns". ABC. Retrieved 10 March 2018.
  20. ^ Jonathon, Devitt (10 March 2018). "Direct Foreign Investment- Doing Business In China". Retrieved 10 March 2018.
  21. ^ "Why do you become 'Singham' for US, not for India? Narendra Modi asks Manmohan Singh". The Times Of India. 28 September 2012. Retrieved 13 December 2012.
  22. ^ "BJP will break recordsssss". The Times Of India. 13 December 2012. Retrieved 13 December 2012.
  23. ^ "Derecognition of overseas corporate bodies (OCBs)" (PDF). 8 December 2003. Retrieved 16 September 2012.
  24. ^ Airlines: Govt OK's 49% FDI stake buy. Indian Express (14 September 2012). Retrieved on 28 July 2013.
  25. ^ "FDI Limit in Insurance sector increased from 26% to 49%". Retrieved 10 July 2014.
  26. ^ "China Edges Out U.S. as Top Foreign-Investment Draw Amid World Decline". Wall Street Journal. 23 October 2012.
  27. ^ a b "TOP 10 FDI EQUITY INFLOW CASES FROM APRIL 2000" (PDF). Archived from the original (PDF) on 19 February 2015. Retrieved 27 January 2015.
  28. ^ "India pips US, China as No. 1 foreign direct investment destination". The Times of India. Times News Network. Retrieved 1 October 2015.
  29. ^ "India Pips China, US to Emerge as Favourite Foreign Investment Destination". Retrieved 1 October 2015.
  30. ^ "India pips China as top FDI destination in 2015". The Times of India. Retrieved 25 April 2016.
  31. ^ a b c "White House Touts Growing Foreign Direct Investment In The U.S. accepted ngp". ABC News. 20 June 2011. Retrieved 2 November 2012.
  32. ^ [1]
  33. ^ "U.S. FDI and site selection". Greyhill Advisors. Archived from the original on 15 October 2011. Retrieved 19 October 2011.
  34. ^ "China buys $22bn worth of US homes, leads global pack". Russia Today. 9 July 2014. Retrieved 26 July 2014.
  35. ^ "Why Do Foreigners Invest in the United States?" (PDF). Federal Reserve Bank of San Francisco. October 2008. Retrieved 17 November 2012.
  36. ^ "H.R. 2052 - Text". United States Congress. p. Section 4(a). Retrieved 11 September 2013.
  37. ^ Kasperowcz, Pete (9 September 2013). "House passes bill aimed at boosting foreign direct investments in the U.S." The Hill. Retrieved 11 September 2013.
  38. ^ "Foreign Direct Investment (Stocks) in Canada : Millions of dollars" (PDF). Statistics Canada, Table 376-0051. April 2015. Retrieved 21 September 2018.
  39. ^ "Foreign Direct Investment Stocks in Canada (NAICS)" (PDF). Statistics Canada, CANSIM 376-0052. April 2015. Retrieved 21 September 2018.
  40. ^ "Canada's State of Trade: Trade and Investment Update 2012". Retrieved 1 October 2015.
  41. ^ a b c d e 張玹誠(2006)。外國直接投資俄羅斯之研究。國立政治大學俄羅斯研究所碩士論文,未出版,台北。
  42. ^ "Послание Президента Федеральному Собранию". Retrieved 21 September 2018.
  43. ^ 徐牧群(2012)。俄羅斯外人直接投資與貧窮改善之研究。國立政治大學俄羅斯研究所碩士論文,未出版,台北。

External links

Bilateral investment treaty

A bilateral investment treaty (BIT) is an agreement establishing the terms and conditions for private investment by nationals and companies of one state in another state. This type of investment is called foreign direct investment (FDI). BITs are established through trade pacts. A nineteenth-century forerunner of the BIT is the friendship, commerce, and navigation treaty (FCN).Most BITs grant investments made by an investor of one Contracting State in the territory of the other a number of guarantees, which typically include fair and equitable treatment, protection from expropriation, free transfer of means and full protection and security. The distinctive feature of many BITs is that they allow for an alternative dispute resolution mechanism, whereby an investor whose rights under the BIT have been violated could have recourse to international arbitration, often under the auspices of the ICSID (International Center for the Settlement of Investment Disputes), rather than suing the host State in its own courts. This process is called investor-state dispute settlement.

The world's first BIT was signed on November 25, 1959 between Pakistan and Germany. There are currently more than 2500 BITs in force, involving most countries in the world. Influential capital exporting states usually negotiate BITs on the basis of their own "model" texts (such as the Indian or U.S. model BIT).

Dutch disease

In economics, the Dutch disease is the apparent causal relationship between the increase in the economic development of a specific sector (for example natural resources) and a decline in other sectors (like the manufacturing sector or agriculture). The putative mechanism is that as revenues increase in the growing sector (or inflows of foreign aid), the given nation's currency becomes stronger (appreciates) compared to currencies of other nations (manifest in an exchange rate). This results in the nation's other exports becoming more expensive for other countries to buy, and imports becoming cheaper, making those sectors less competitive.

While it most often refers to natural resource discovery, it can also refer to "any development that results in a large inflow of foreign currency, including a sharp surge in natural resource prices, foreign assistance, and foreign direct investment".The term was coined in 1977 by The Economist to describe the decline of the manufacturing sector in the Netherlands after the discovery of the large Groningen natural gas field in 1959.


The process of expropriation "occurs when a public agency (for example, the provincial government and its agencies, regional districts, municipalities, school boards, post-secondary institutions and utilities) takes private property for a purpose deemed to be in the public interest". Unlike eminent domain, expropriation may also refer to the taking of private property by a private entity authorized by a government to take property in certain situations.

Due to political risks that are involved when countries engage in international business it is important to understand the expropriation risks and laws within each of the countries that business is conducted in order to understand the risks as an investor in that country.

FDi magazine

fDi Magazine is an English-language bi-monthly news and foreign direct investment (FDI) publication, providing an up-to-date review of global investment activity. The A4 glossy pages reach a circulation of 15,488 ABC audited, active corporate and crossborder investment professionals across the world.fDi Magazine is a central part of the fDi Intelligence portfolio of investment products and services from the Financial Times.

Foreign direct investment in India

Foreign direct investment (FDI) in India is a major monetary source for economic development in India. Foreign companies invest directly in fast growing private Indian businesses to take benefits of cheaper wages and changing business environment of India. Economic liberalisation started in India in wake of the 1991 economic crisis and since then FDI has steadily increased in India, which subsequently generated more than one crore jobs. According to the Financial Times, in 2015 India overtook China and the United States as the top destination for the Foreign Direct Investment. In first half of the 2015, India attracted investment of $31 billion compared to $28 billion and $27 billion of China and the US respectively.

Foreign direct investment in Iran

Foreign direct investment in Iran (FDI) has been hindered by unfavorable or complex operating requirements and by international sanctions, although in the early 2000s the Iranian government liberalized investment regulations. Iran ranks 62nd in the World Economic Forum's 2011 analysis of the global competitiveness of 142 countries. In 2010, Iran ranked sixth globally in attracting foreign investments.Foreign investors have concentrated their activity in a few sectors of the economy: the oil and gas industries, vehicle manufacture, copper mining, petrochemicals, foods, and pharmaceuticals. Iran absorbed US$24.3 billion of foreign investment from 1993 to 2007 and US$34.6 billion for 485 projects from 1992 to 2009.Opening Iran’s market place to foreign investment could also be a boon to competitive multinational firms operating in a variety of manufacturing and service sectors, worth $600 billion to $800 billion in new investment opportunities over the next decade.

Foreign direct investment in Romania

Foreign direct investment (FDI) in Romania has increased dramatically. In 2006 net foreign direct investment was inbound US$12 billion (EUR 9.1 billion). Cheap and skilled labor force, low taxes, a 16% flat tax for corporations and individuals, no dividend taxes, liberal labor code and a favorable geographical location are Romania’s main advantages for foreign investors. FDI has grown by 600% since 2000 to around $13.6 billion or $2,540 per capita by the end of 2004. In October 2005 new investment stimuli introduced – more favorable conditions to IT and research centers, especially to be located in the east part of the country (where is more unemployment), to bring more added value and not to be logistically demanding.

Foreign exchange controls

Foreign exchange controls are various forms of controls imposed by a government on the purchase/sale of foreign currencies by residents or on the purchase/sale of local currency by nonresidents.

Common foreign exchange controls include:

Banning the use of foreign currency within the country

Banning locals from possessing foreign currency

Restricting currency exchange to government-approved exchangers

Fixed exchange rates

Restrictions on the amount of currency that may be imported or exportedCountries with foreign exchange controls are also known as "Article 14 countries", after the provision in the International Monetary Fund agreement allowing exchange controls for transitional economies. Such controls used to be common in most countries, particularly poorer ones, until the 1990s when free trade and globalization started a trend towards economic liberalization. Today, countries that still impose exchange controls are the exception rather than the rule.

Often, foreign exchange controls can result in the creation of black markets to exchange the weaker currency for stronger currencies. This leads to a situation where the exchange rate for the foreign currency is much higher than the rate set by the government, and therefore creates a shadow currency exchange market. As such, it is unclear whether governments have the ability to enact effective exchange controls.

Foreign ownership

Foreign ownership or control of a business or natural resource in a country by individuals who are not citizens of that country or by companies whose headquarters outside that country.In general, foreign ownership occurs when multinational corporations, which do business in more than one country, inject long-term investments in a foreign country, usually in the form of foreign direct investment or acquisition.If a multinational corporation acquires at least half of a company, the multinational corporation becomes a holding company, and the company receiving the foreign investment becomes a subsidiary. Also, foreign ownership can occur when a domestic property is acquired by a foreign individual. An example is an Indian businessman buying a house in Hong Kong.

Invest Odisha

Invest Odisha is part of the Ministry of Industries Administration of the Government of Odisha to promote national and foreign direct investment to Odisha. Invest Odisha is spearheading the investment promotion campaign for Odisha. This team was previously referred to as Team Odisha. Industrial facilitation and investment promotion are the key roles of Invest Odisha.

Invest in America

Invest in America was part of the U.S. Department of Commerce's International Trade Administration to promote foreign direct investment to the United States, the only such U.S. effort at the federal level. Invest in America is now superseded by SelectUSA.On March 7, 2007, Invest in America was established in the International Trade Administration to promote the United States as a destination for inward direct investment, also known as foreign direct investment. Invest in America is the primary U.S. Government mechanism to manage foreign direct investment promotion. Efforts are focused on outreach to foreign governments and investors, support for state governments’ investment promotion efforts, and addressing business climate concerns by serving as ombudsman in Washington for the international investment community.Invest in America reinforces the longstanding U.S. Open Investment Policy. Through Invest in America, the Department of Commerce promotes the U.S. economy as the best place in the world to do business.

Investment policy

An investment policy is any government regulation or law that encourages or discourages foreign investment in the local economy, e.g. currency exchange limits.

Languages of Madagascar

The Malagasy language of Malayo-Polynesian origin, is generally spoken throughout the island. The official languages of Madagascar are Malagasy and French. Madagascar is a Francophone country, and French is spoken among the educated population of this former French colony. Including second-language speakers, there are more speakers of Malagasy than French in Madagascar [1].

In the first Constitution of 1958, Malagasy and French were named the official languages of the Malagasy Republic.No official languages were recorded in the Constitution of 1992. Instead, Malagasy was named the national language; however, many sources still claimed that Malagasy and French were official languages, as they were de facto. In April 2000, a citizen brought a legal case on the grounds that the publication of official documents in the French language only was unconstitutional. The High Constitutional Court observed in its decision that, in the absence of a language law, French still had the character of an official language.

In the Constitution of 2007, Malagasy remained the national language while official languages were reintroduced: Malagasy, French, and English. The motivation for the inclusion of English was partly to improve relations with the neighboring countries where English is used and to encourage foreign direct investment. English was removed as an official language from the constitution approved by voters in the November 2010 referendum. These results are not recognized by the political opposition or the international community, who cite lack of transparency and inclusiveness in the organization of the election by the High Transitional Authority.

List of countries by FDI abroad

This is the list of countries by stock of Foreign direct investment (FDI) abroad, that is the cumulative US dollar value of all investments in foreign countries made directly by residents - primarily companies - of the home country, as of the end of the time period indicated. Direct investment excludes investment through purchase of shares.

The list is based on the CIA World Factbook data.

List of countries by received FDI

This article includes a list of countries of the world sorted by received foreign direct investment (FDI) stock, the level of accumulated FDI in a country. The US dollar estimates presented here are calculated at market or government official exchange rates.

The list estimates for 31 December of the indicated year, according to the CIA World Factbook. Non-sovereign states are italicised.

List of countries by received FDI in the past

This article includes a list of countries of the world sorted by received Foreign direct investment (FDI) stock, the level of accumulated FDI in a country during the past years. The US dollar estimates presented here are calculated at market or government official exchange rates.

Special economic zone

A special economic zone(SEZ) is an area in which the business and trade laws are different from the rest of the country. SEZs are located within a country's national borders, and their aims include increased trade balance,employment, increased investment, job creation and effective administration. To encourage businesses to set up in the zone, financial policies are introduced. These policies typically encompass investing, taxation, trading, quotas, customs and labour regulations. Additionally, companies may be offered tax holidays, where upon establishing themselves in a zone, they are granted a period of lower taxation.

The creation of special economic zones by the host country may be motivated by the desire to attract foreign direct investment (FDI). The benefits a company gains by being in a special economic zone may mean that it can produce and trade goods at a lower price, aimed at being globally competitive. In some countries, the zones have been criticized for being little more than labor camps, with workers denied fundamental labor rights.

Tax competition

Tax competition, a form of regulatory competition, exists when governments use reductions in fiscal burdens to encourage the inflow of productive resources or to discourage the exodus of those resources. Often, this means a governmental strategy of attracting foreign direct investment, foreign indirect investment (financial investment), and high value human resources by minimizing the overall taxation level and/or special tax preferences, creating a comparative advantage.

Some observers suggest that tax competition is generally a central part of a government policy for improving the lot of labour by creating well-paid jobs (often in countries or regions with very limited job prospects). Others suggest that it is beneficial mainly for investors, as workers could have been better paid (both through lower taxation on them, and through higher redistribution of wealth) if it was not for tax competition lowering effective tax rates on corporations.

Some economists argue that tax competition is beneficial in raising total tax intake due to low corporate tax rates stimulating economic growth.

Others argue that tax competition is generally harmful because it distorts investment decisions and thus reduces the efficiency of capital allocation, redistributes the national burden of taxation away from capital and onto less mobile factors such as labour, and undermines democracy by forcing governments into modifying tax systems in ways that voters do not want. It also tends to increase complexity in national and international tax systems, as governments constantly modify tax systems to take account of the 'competitive' tax environment.

It has also been argued that just as competition is good for businesses, competition is good for governments as it drives efficiencies and good governance of the public budget.Others point out that tax competition between countries bears no relation to competition between companies in a market: consider, for instance, the difference between a failed company and a failed state—and that while market competition is regarded as generally beneficial, tax competition between countries is always harmful.


Under-capitalization refers to any situation where a business cannot acquire the funds they need. An under-capitalized business may be one that cannot afford current operational expenses due to a lack of capital, which can trigger bankruptcy, may be one that is over-exposed to risk, or may be one that is financially sound but does not have the funds required to expand to meet market demand.

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