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Definition of foreign direct investment
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. [1]
The purchase or establishment of income-generating assets in a foreign country that entails the control of the operation or organisation.
FDI is distinguished from portfolio foreign investment (the purchase of one country’s securities by nationals of another country) by the element of control. Standard definitions of control use the internationally agreed 10 per cent 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.
FDI is not just a transfer of ownership as it usually involves the transfer of factors complementary to capital, including management, technology and organisational skills.
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