According to the United Nations’ annual World Investment Report, published by the organization’s economic think tank UNCTAD, global foreign direct investment will rise 12.5 percent to $1.62 trillion this year as the economic recovery tempts China, private equity and big companies. The UN has predicted sustained growth in coming years for such investment, reaching $1.75 trillion in 2015 and $1.85 trillion in 2016.
Opportunities in Foreign Direct Investment
Foreign direct investment (FDI) is a direct investment, in which an individual or a company from one country invests in the production or business from another country. This can occur either by buying a company in the target country or by expanding operations of an existing business in that country. A foreign direct investment differs from a portfolio investment, in which money is invested into the stocks or bonds — this is considered a passive or indirect investment.
There are a number of ways to make an overseas investment:
- Set up a subsidiary or associate company in the foreign country
- Acquire shares of an overseas company
- Merger or joint venture
According to Investopedia, the accepted threshold for a foreign direct investment relationship, as defined by the OECD, is 10%. That is, the foreign investor must own at least 10% or more of the voting stock or ordinary shares of the investee company.