Introduction to FDI (Foreign Direct Investment)
- An FDI is an investment advanced by a firm or an individual in one country into business interests established in another country.
- Generally, FDI occurs when any investor establishes foreign business operations or obtains foreign business assets in a foreign company.
- However, FDIs are separated from portfolio investments in which an investor simply purchases equities of foreign-based companies.
Understanding FDI (Foreign Direct Investment)
- Foreign direct investments are normally made in open economies that advance a skilled workforce and above-average growth prospects for investors instead of tightly regulated economies.
- Foreign direct investment involves more than just a capital investment. It may involve provisions of management or technology as well.
- The principal feature of foreign direct investment is that it establishes either efficient control of or at least substantial influence over the decision-making of any foreign business.
Advantages Of FDI
*Economic Development Stimulation: *FDI can spur a target country’s economic development, produce a more conducive environment for companies, and stimulate the local community and economy.
*Easy International Trade: *Countries usually have their import tariffs, which makes trading rather tricky. Many economic sectors require a general presence in the international markets to guarantee that sales and goals are met. FDI makes all of these global trade aspects easier.
*Employment And Economic Boost: *FDI creates new jobs and opportunities as investors build new companies in foreign countries. This leads to an increase in income and more purchasing power to locals, leading to an overall boost in targetted economies.
*Tax Incentives: *Of course — taxes. Foreign investors gain tax incentives that are very beneficial regardless of your selected field of business. Everybody loves a tax write-off.
*Resource Transfer: *Foreign direct investment provides for resource transfers and the exchanges of knowledge, technologies, and skills.
