Question

What is a foreign direct investment?

An example of foreign direct investment.

What is the impact of the pandemic on foreign direct investment?

Summary of Foreign direct investment (Own words)

Answer 1

Meaning of Foreign direct investment

A foreign direct investment (FDI) is an investment made by a firm or individual in one country into business interests located in another country. Generally, FDI takes place when an investor establishes foreign business operations or acquires foreign business assets in a foreign company. However, FDIs are distinguished from portfolio investments in which an investor merely purchases equities of foreign-based companies.

Foreign direct investment (FDI) is when a company takes controlling ownership in a business entity in another country. With FDI, foreign companies are directly involved with day-to-day operations in the other country. This means they aren’t just bringing money with them, but also knowledge, skills and technology.

Generally, FDI takes place when an investor establishes foreign business operations or acquires foreign business assets, including establishing ownership or controlling interest

EXAMPLE OF FOREIGN DIRECT INVESTMENT

Examples of foreign direct investments include mergers, acquisitions, retail, services, logistics, and manufacturing, among others. Foreign direct investments and the laws governing them can be pivotal to a company's growth strategy.

In 2017, for example, U.S.-based Apple announced a $507.1 million investment to boost its research and development work in China, Apple's third-largest market behind the Americas and Europe. The announced investment relayed CEO Tim Cook's bullishness toward the Chinese market despite a 12% year-over-year decline in Apple's Greater China revenue in the quarter preceding the announcement.

IMPACT OF PANDEMIC ON FDI

COVID-19 is uprooting economic globalization. With both supply and demand experiencing simultaneous shocks due to containment measures, global production networks are being disrupted on a scale never witnessed before. The pandemic has exposed how globally interconnected the flow of goods and services has become, and countries are now rethinking their international trade strategies to reduce their vulnerability to global economic shocks.

Pandemic has dramatically disrupted the flow of foreign direct investment and has an adverse effects on globalization.

According to UNCTAD That is US Conference on Trade and Development the FDI flows are expected to contact by 30 to 40% during year 2020/2021.

The consequences for developing countries will be severe as they are on the receiving end of FDI.

SUMMARY OF FOREIGN DIRECT INVESTMENT.

FDI plays an important role in economic development of a country. It is beneficial for both capital exporting and capital importing countries.

It expands the market for goods and services of the home country and host country gets the benifit of expansion of employment opportunities and latest technologies.

They get the benifit of using world class products which were not produced in their country before.

There are other benefits for home country like

Market diversification

Tax inventive

Lower labour cost

Subsidies etc.

For host country benifit are

Economic simulation

Development of human capital

Increase in employing

Access to management expertise, technology and skills.