Foreign Direct Investment (FDI)

Foreign direct investment (FDI) is the investment in an entity in one economy by an investor in another economy. Unlike foreign portfolio investment (FPI), in which the investment is in foreign financial instruments, FDI provides the investor with control over the [Page 928]acquired asset. Control of an asset has been defined (OECD Benchmark) as owning 10% or more of the ordinary shares or voting stock in an incorporated enterprise or the equivalent in an unincorporated enterprise. FDI can occur in various forms: greenfield investments in which there is an investment in a new facility; mergers in which the assets and operations of firms from two different countries are combined to form a new entity; and acquisitions in which there is a transfer of existing assets ...