What does Foreign Direct Investment (FDI) involve?

Foreign Direct Investment (FDI) involves direct investment and management in other countries, which reflects a significant commitment to the foreign market. This type of investment usually entails a company or individual acquiring a lasting interest in an enterprise operating in a different country, which can include the establishment of a new business, expansion of existing operations, or acquiring already established companies. FDI goes beyond mere financial investment; it typically includes the transfer of resources, such as technology, expertise, and managerial practices, which can help boost productivity and innovation in the host country.

This highlights the active role that the investing entity plays in the management and operational decision-making of the foreign entity, rather than simply purchasing an asset or investing capital without further involvement. Such engagement through FDI can also facilitate stronger economic ties and influence between the home and host countries, promoting growth and development in emerging markets.