Question

Could you please:

1) Explain FDI in your own words

2) Define its importance on corporations and the global economy - use researched data

3) Use an example of recent successful FDI

Answer 1

1. FDI, Foreign Direct Investment, is the investment by any country or Company in a different economy (in other country specifically) to own and flourish their businessess by holding more than a minimum share of 25%.

2. The importance of FDI on corporations and global economy significant as it helps create the employement, utilization of cheap land, labour and material, thereby helping to save a lot of cost to the company and export the finished products to other economy or country at an much competitive rate increasing the overall revenue for the company and the economy overall.

As per a report of UNCTAD of 2004, approx. 70 millions of jobs were created due to Foreign direct investment and Transnational cooperation. And, in 2019, the total Global FDI flows were recorded a $ 1.54 Trillions.

3. A recent example of FDI would be by a US Private equity firm SILVER LAKE into an EdTech company named BYJU in India of an amount of $500 M in Sep2020.

Hence, the FDI has become a norm in the whole world to expand the business either by having a controlling stake or by having its own facility to product / manufacture goods or services around the globe.