What is FDI?
What is FDI?
FDI or Foreign Direct Investment is a long-term investment participation of a specific country to another country. FDI involves the two countries in participating with joint venture, management, expertise and technology transfer. FDI is categorized into two, which are ‘inward FDI’ and ‘outward FDI.’ Categorization results into net FDI inflow, which may be positive or negative. FDI also resulted in ‘stock of FDI’ referring to the increasing number for a specific time. However, direct investments do not include the buying of shares for investment.
FDI serves as a gauge of productive assets owned by a foreign investor. Examples of productive assets are buildings such as factories. Lands and mines are also some examples of productive assets. As a sign of economic growth, foreign investment can be used as gauge. Since 1960s, United States of America has shown economic growth.
To promote investments from foreign investors, the United States Department of Commerce initiated the ‘Invest in America’ policy. The policy brings together the provision of assistance for both local and state investment levels. It also facilitates queries of investors, carries out schemes or plans in helping foreign investors, as well as offering guidelines to investors to access the legal system.
In 2008, there is an estimated $325 billion of FDI inflow in the United States. The US is considered the major FDI recipient in the world. FDI brought many advantages to the United States. Foreign investments have created more than half a million jobs from approximately 4000 projects. Foreign investments have reached at more than $300 billion in investments. Due to FDI, each employee who benefited was given an average of $68,000 in annual salary and that is about $365 billion dollars in the total payroll amount.
Investors engaging under the Foreign Direct Investments have several types. Below are considered foreign direct investors and any one or a combination from the list is considered the same.
- Individual foreigner
- Group of related foreign individuals
- Any entity (incorporated or not)
- Both public and private foreign company
- A group of foreign ventures
- Foreign government
- Social institutions
FDI is considered a success to the growth of the US economy. Exports have greatly increased due to the distribution methods provided by multinational networks. Moreover, associates of foreign investors also helped raise fund for the research and development for several national projects. The increased capital resulted to an increased inward FDI. Such growth to the overall economy resulted to high living standards.
Foreign Direct Investment had not only helped the United States but as well as other countries. In China, just 10 years after adopting the FDI, the country had grown to more than $300 billion. China is considered as the leader when it comes to FDI among the fast developing countries. Moreover, India had also benefited from FDI. India is considered next to China in terms of leading countries adopting FDI. India has attracted FDI inflow from services, construction, telecommunications and computer hardware and software business sectors. In poor nations, FDI is seen to be a significant answer for boosting economic growth. Singapore is one that also benefited from such foreign investment policy.