Foreign Direct Investment Expected to Grow

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 InvestmentForeign 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.

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