Foreign Direct Investment

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  • A long-term capital flow or investment in which a nonresident entity has significant management control of voting stock (10% or more) over an enterprise in a foreign or host country. Unlike short-term capital flows, foreign direct invest ment (FDI) is not immediately susceptible to reversibil ity. The bulk of FDI activities in developing countries are undertaken by multinational or transnational corporations. A transnational corporation is a firm that is head quartered in a home country but controls assets of enterprises that are central to its profitability in foreign or host countries.

    Supporters and critics of FDI have made passionate arguments to show the benefits and drawbacks of FDI. In the 1960s and 1970s, many developing countries adopted steps to discourage FDI because of its extractive or ...

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