Foreign Direct Investment (FDI): definition of FDI

Relationship between Countries at Different Levels of Development

Foreign Direct Investment (FDI): Definition of FDI

Imagine you own a small bakery in your hometown. One day, a big supermarket chain from another city decides to open a new branch in your town and wants to use your bakery’s ovens and kitchen staff. They invest money, bring new equipment, and maybe even hire local workers. This is a simple way to think about Foreign Direct Investment (FDI) – it’s when a company or individual from one country puts money into a business or assets in another country, with the intention of having a lasting influence and control over that investment. 🌍💼

• FDI is a long‑term investment, not a short‑term trade transaction.
• It usually involves ownership of at least 10% of a company’s voting shares or control over its operations.
• FDI can be in the form of building new factories, buying existing businesses, or setting up joint ventures.
• It brings capital, technology, and expertise to the host country, helping it grow and develop.

1. Identify a profitable opportunity in the host country.
2. Decide the type of investment: Greenfield (new plant) or Brownfield (acquisition).
3. Secure financing and legal approvals.
4. Establish operations and manage the investment.
5. Monitor performance and adjust strategy as needed.