Foreign direct investment (International Marketing) Dr. Tahir

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FDI is the ownership and control of foreign assets in practice, FDI usually involves the ownership of the whole or partial of a company in the foreign country, this equity investment can take the variety of forms

• Individuals
• Group of related individuals
• An Incorporated
• An Unincorporated
• Public or Private Companies
• Group of Related Enterprises
• A Government Body

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Foreign direct investment

Foreign direct investment (FDI) refers to long term participation by country A into country B. It usually involves participation in management, joint-venture, transfer of technology and expertise. There are two types of FDI: inward foreign direct investment and outward foreign direct investment, resulting in a net FDI inflow (positive or negative).

Inward FDI for an economy can be defined as the capital provided from a foreign direct investor (i.e. the coca cola company) residing in a country, to that economy, which is residing in another country. (i.e. China's economy).

EXAMPLE: General Motors decides to open a factory in Malaysia. They are going to need some capital. That capital is inward FDI for Malaysia.

Outward FDI is contrast with Inward FDI

 
History
Foreign direct investment (FDI) is a measure of foreign ownership of productive assets, such as factories, mines and land. Increasing foreign investment can be used as one measure of growing economic globalization. Figure below shows net inflows of foreign direct investment as a percentage of gross domestic product (GDP). The largest flows of foreign investment occur between the industrialized countries (North America, Western Europe and Japan). But flows to non-industrialized countries are increasing sharply.

US International Direct Investment Flows:

Period	FDI Outflow	FDI Inflows	Net
1960-69	$ 42.18 bn	$ 5.13 bn	+ $ 37.04 bn
1970-79	$ 122.72 bn	$ 40.79 bn	+ $ 81.93 bn
1980-89	$ 206.27 bn	$ 329.23 bn	- $ 122.96 bn
1990-99	$ 950.47 bn	$ 907.34 bn	+ $ 43.13 bn
2000-07	$ 1,629.05 bn	$ 1,421.31 bn	+ $ 207.74 bn
Total	$ 2,950.69 bn	$ 2,703.81 bn	+ $ 246.88 bn

Types

A foreign direct investor may be classified in any sector of the economy and could be any one of the following:^{[citation needed]}

• an individual;
• a group of related individuals;
• an incorporated or unincorporated entity;
• a public company or private company;
• a group of related enterprises;
• a government body;
• an estate (law), trust or other societal organisation; or
• any combination of the above.

Methods

The foreign direct investor may acquire 10% or more of the voting power of an enterprise in an economy through any of the following methods:

• by incorporating a wholly owned subsidiary or company
• by acquiring shares in an associated enterprise
• through a merger or an acquisition of an unrelated enterprise
• participating in an equity joint venture with another investor or enterprise

Foreign direct investment incentives may take the following forms:^{[citation needed]}

• low corporate tax and income tax rates
• tax holidays
• other types of tax concessions
• preferential tariffs
• special economic zones
• EPZ - Export Processing Zones
• Bonded Warehouses
• Maquiladoras
• investment financial subsidies
• soft loan or loan guarantees
• free land or land subsidies
• relocation & expatriation subsidies
• job training & employment subsidies
• infrastructure subsidies
• R&D support
• derogation from regulations (usually for very large projects)

Debates about the benefits of FDI for low-income countries

Some countries have put restrictions on FDI in certain sectors. India, with its restriction on FDI in the retail sector is an example.^[2] In a country like India, the “walmartization” of the country could have significant negative effects on the overall economy by reducing the number of people employed in the retail sector (currently the second largest employment sector nationally) and depressing the income of people involved in the agriculture sector (currently the largest employment sector nationally).^[3
FDI in Pakistan
Nov. 18 -- Overseas direct investment into Pakistan dropped 53.2 percent in the first four months of the fiscal year that started July 1, the central bank said.

Investment in July-October period fell to $621.8 million from $1.33 billion a year ago, according to an e-mailed statement from the Karachi-based State Bank of Pakistan. Global funds bought $288.4 million more Pakistani stocks than they sold in the four months, compared with net sales of $173.9 million a year earlier, the central bank said.

Pakistan needs overseas investment to bolster an economy that expanded two percent in the year ended June 30, compared with 5.8 percent in the previous 12 months. The government forecasts gross domestic product will grow 3.3 percent this fiscal year.

Foreign direct investment fell to $3.72 billion last fiscal year, from $5.4 billion in the previous 12 months.