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Foreign direct investment

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Jump to: navigation, search Foreign direct investment (FDI) is investment directly into production in a country by a company located in another country, either by buying a company in the target country or by expanding operations of an existing business in that country. Foreign direct investment is done for many reasons including to take advantage of cheaper wages in the country, special investment privileges such as tax exemptions offered by the country as an incentive to gain tariff-free access to the markets of the country or the region. Foreign direct investment is in contrast to portfolio investment which is a passive investment in the securities of another country such as stocks and bonds. [1] [2] As a part of the national accounts of a country FDI refers to the net inflows of investment to acquire a lasting management interest (10 percent or more of voting stock) in an enterprise operating in an economy other than that of the investor.[3] It is the sum of equity capital, other long-term capital, and short-term capital as shown the balance of payments. 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) and "stock of foreign direct investment", which is the cumulative number for a given period. Direct investment excludes investment through purchase of shares.[4] FDI is one example of international factor movements.

History
The figure below shows net inflows of foreign direct investment in the United States. The largest flows of foreign investment occur between the industrialized countries (North America, Western Europe and Japan). US International Direct Investment Flows:[5]
Period FDI Inflow FDI Outflow $ 5.13 bn $ 40.79 bn $ 329.23 bn $ 907.34 bn Net Inflow + $ 37.04 bn + $ 81.93 bn $ 122.96 bn + $ 43.13 bn

196069 $ 42.18 bn 197079 $ 122.72 bn 198089 $ 206.27 bn 199098 $ 950.47 bn

200007 $ 1,629.05 bn $ 1,421.31 bn + $ 207.74 bn Total $ 2,950.72 bn $ 2,703.81 bn + $ 246.88 bn

Types
1. Horizontal FDI arises when a firm duplicates its home country-based activities at the same value chain stage in a host country through FDI.[6] 2. Platform FDI 3. Vertical FDI takes place when a firm through FDI moves upstream or downstream in different value chains i.e., when firms perform value-adding activities stage by stage in a vertical fashion in a host country.[7]

Whereas Horizontal FDI decrease international trade as the product of them is usually aimed at host country, the two other types generally act as a stimulus for it.

Methods
The foreign direct investor may acquire 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 individual 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 infrastructure subsidies R&D support derogation from regulations (usually for very large projects)

[edit] Global foreign direct investment


The United Nations Conference on Trade and Development said that there was no significant growth of Global FDI in 2010. In 2010 was $1,122 billion and in 2009 was $1,114 billion. The figure was 25 percent below the pre-crisis average between 2005 & 2007.[8]

[edit] Foreign direct investment in the United States


This section does not cite any references or sources.

The United States is the worlds largest recipient of FDI. U.S. FDI totaled $194 billion in 2010. 84% of FDI in the U.S. in 2010 came from or through eight countries: Switzerland, the United Kingdom, Japan, France, Germany, Luxembourg, the Netherlands, and Canada.[9] The $2.1 trillion stock of FDI in the United States at the end of 2008 is the equivalent of approximately 16 percent of U.S. gross domestic product (GDP). Benefits of FDI in America: In the last 6 years, over 4000 new projects and 630,000 new jobs have been created by foreign companies, resulting in close to $314 billion in investment.[citation needed] US affiliates of foreign companies have a history of paying higher wages than US corporations.[citation needed] Foreign companies have in the past supported an annual US payroll of $364 billion with an average annual compensation of $68,000 per employee.[citation needed] Increased US exports through the use of multinational distribution networks. FDI has resulted in 30% of jobs for Americans in the manufacturing sector, which accounts for 12% of all manufacturing jobs in the US.

Affiliates of foreign corporations spent more than $34 billion on research and development in 2006 and continue to support many national projects. Inward FDI has led to higher productivity through increased capital, which in turn has led to high living standards.[10][dead link]

[edit] Foreign direct investment in China


FDI in China, also known as RFDI (Renminbi foreign direct investment), has increased considerably in the last decade reaching $185 billion in 2010.[11] China is the second largest recipient of FDI globally. FDI into China fell by over onethird in 2009 due the Global Financial Crisis (global macroeconomic factors) but rebounded in 2010.[12]

[edit] Foreign direct investment in India


Starting from a baseline of less than $1 billion in 1990, a recent UNCTAD survey projected India as the second most important FDI destination (after China) for transnational corporations during 20102012. As per the data, the sectors which attracted higher inflows were services, telecommunication, construction activities and computer software and hardware. Mauritius, Singapore, the US and the UK were among the leading sources of FDI. According to Ernst and Young, foreign direct investment in India in 2010 was $44.8 billion, and in 2011 experienced an increase of 25% to $50.8 billion.[13] India has seen an eightfold increase in its FDI in March 2012.[14] The worlds largest retailer WalMart has termed Indias decision to allow 51% FDI in multi-brand retail as a first important step and said it will study the finer details of the new policy to determine the impact on its ability to do business in India.However this decision of the government is currently under suspension due to opposition from multiple political quarters.

[edit] Foreign direct investment and the developing world


FDI provides an inflow of foreign capital and funds,investment in addition to an increase in the transfer of skills, technology, and job opportunities.[citation needed] Many of the Four Asian Tigers benefited from investment abroad.[citation needed] A recent meta-analysis of the effects of foreign direct investment on local firms in developing and transition countries suggest that foreign investment robustly increases local productivity growth.[15] The Commitment to Development Index ranks the "development-friendliness" of rich country investment policies. Foreign Investment in India is announced by Govt. of India named as FEMA(Foreign Exchange Management Act).
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April 17, 2012 | Ashis Ray , TNN LONDON: Foreign Direct Investment (FDI) in multibrand retail will go ahead, said commerce and industry minister Anand Sharma. "It is unfortunate that the matter got trapped in partisan politics. But we haven't gone back, there is only a pause. " Asked if India's decision to allow FDI to Pakistan was aunilateral offer or based on reciprocity, he said that he saw "no reason" why Pakistan wouldn't reciprocate. HYDERABAD

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BANGALORE: Ahead of the presentation of the Union Budget, software icon NR Narayana Murthy today urged the government to make it easier for businesses to grow and foreign direct investment, among others. On his wish-list for the budget, the chairman emeritus of software major Infosys, told reporters here that if the government can do whatever is needed to accelerate the country's progress in basic and higher education, in the areas of nutrition, health and shelter, "that would be good". CHANDIGARH

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FDI in retail: I will set Walmart stores on fire, threatens Uma Bharati
November 25, 2011 | PTI LUCKNOW: BJP leader Uma Bharati on Friday threatened to set on fire Walmart store wherever it opens in the country to register her party's protest against allowing Foreign Direct Investment (FDI) in retail. "By giving permission to Walmart to directly invest in the retail sector, the Centre has jeopardised the employment opportunities of Dalits, poor and backwards," she told reporters here. "I would personally set afire the showroom when it opens anywhere in the country and I am ready to be arrested for the act," Bharati said, condemning the decision of the Union cabinet to allow 51 per cent FDI in multi-brand retail and 100 per cent FDI in single-brand retail. INDIA

Kerala launches campaign to attract FDI


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Outward FDI by India Inc hits $43 bn


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11th Five Year Plan targets 62,000 mw power


July 4, 2011 | Dileep Athavale , TNN

PUNE: The India Power Summit 2011 , a 2-day conference will be held on September 30 and October 1, 2011 to discuss and identify the challenges, investment opportunities in conventional and renewable energy sectors to leverage the enormous opportunities inherent in the Indian power sector. PUNE: The India Power Summit 2011 , a 2-day conference will be held on September 30 and October 1, 2011 to discuss and identify the challenges, investment opportunities in conventional and renewable energy sectors to leverage the enormous opportunities inherent in the Indian power sector. INDIA

'Mumbai can transform into a global financial centre'


March 19, 2006 | TNN MUMBAI: Prime Minister Manmohan Singh on Saturday expressed confidence that India was poised to grow at a rate in the range of 9-10% every year. "Our optimism is based on the fact that our savings rate is now over 29% of GDP and the investment rate is about 31% of GDP. And with a growing young population and as our economy becomes more hospitable to foreign direct investment, we expect a further increase in the investment rate," he said. Hinting that the Mumbai SEZ could be the first to experiment with the risky but confidence-boosting measure, he said it would facilitate the transformation of Mumbai into a global financial centre. CHANDIGARH

Chautala begins foreign tour Thursday


November 7, 2002 | TNN CHANDIGARH: Haryana chief minister Om Prakash Chautala will leave on an eight-nation tour on Thursday. The delegation accompanying the chief minister comprises senior state government officials and business representatives. This is Chautala's third foreign tour since he assumed office nearly three years back. This trip is also being projected by officials as part of the chief minister's drive to attract foreign direct investment by projecting Haryana as a favourable destination for investment in the fields of information technology, automobile and tourism. INDIA-BUSINESS

FDI proposals worth Rs 214 cr cleared


July 31, 2002 | PTI NEW DELHI: The government on Wednesday cleared 46 foreign direct investment (FDI) proposals involving Rs 214 crore, including the Rs 73.76 crore proposal of CHUBB Global Financial Services for acquiring 26 per cent stake in the Indian general insurance venture. The proposals were cleared by Commerce and Industry Minister Murasoli Maran after the Foreign Investment Promotion Board (FIPB) submitted these, according to an official statement. Major investment proportion pertains to insurance, manufacture of automotive components and plastic parts, electrical components and telecommunications. REST-OF-WORLD

China's FDI up nearly 14 per cent in January


February 15, 2007 | PTI BEIJING: China used a total of $5.2 billion of foreign direct investment in January, up 13.9 per cent over last year, the Ministry of Commerce said. The country also approved the establishment of 3,370 foreign-invested firms last month, up 10.7 per cent over the corresponding period of 2006. The top 10 countries and regions that invested in China included Hong Kong, South Korea, Japan, Singapore, the United States and Taiwan. However, investment from the European Union dropped by 68.85 per cent in January. INDIA-BUSINESS

No proposal to open retail sector to FDI


December 20, 2002 | PTI NEW DELHI: Finance Minister Jaswant Singh on Friday ruled out any proposal to open the retail sector to foreign direct investment. "There is no such proposal," Singh told the Rajya Sabha when CPI (M) member Nilotpal Basu wanted to know during zero hour if it was true that the government proposed to open up retail sector to the FDI. Basu said opening up retail sector would be against the recommendation of the S P Gupta committee on FDI. INDIA-BUSINESS

No proposal to open retail sector to FDI


December 20, 2002 | PTI NEW DELHI: Finance Minister Jaswant Singh on Friday ruled out any proposal to open the retail sector to foreign direct investment. "There is no such proposal," Singh told the Rajya Sabha when CPI (M) member Nilotpal Basu wanted to know during zero hour if it was true that the government proposed to open up retail sector to the FDI. Basu said opening up retail sector would be against the recommendation of the S P Gupta committee on FDI. HYDERABAD

TDP will oppose FDI in Parliament


July 15, 2002 | TNN HYDERABAD: The TDP ? a key NDA partner ? will oppose the Centre's decision to allow foreign direct investment in print media during the monsoon session of Parliament, convening on Monday, but the government is in no mood to relent. Chief minister N Chandrababu Naidu met his MPs and MLAs on Sunday and instructed MPs to oppose the government on the issue. The chief minister believes that the FDI in print would lead to serious complications in future. However, BJP president Venkaiah Naidu, now in the city, made it clear that despite pressure there was no question of reconsidering the decision. INDIA

FDI in pension to be 26 per cent


April 28, 2005 | PTI NEW DELHI: Foreign direct investment in pension sector is likely to be pegged at 26 per cent initially and six players with at least one PSU will be allowed to operate as pension fund managers. "FDI may be initially pegged at 26 per cent for pension sector as in the case of insurance sector. However, it is for government to decide and notify it," interim pension fund regulatory & development authority chairman D Swarup said. Though FDI cap is likely to be 26 per cent, government can increase it later as it has been proposed for insurance. INDIA-BUSINESS

FDI in retail set to be delayed


November 17, 2005 | TNN NEW DELHI: Foreign direct investment in retail sector is likely to be delayed. Commerce and industry minister Kamal Nath said government has so far not been able to evolve a policy to protect the interest of small street shop owners. He said there is an apprehension that entry of foreign players might displace the existing players. This, he said, is not acceptable. He said that the issue is not of domestic versus foreign players, but its rather between big vs small. INDIA-BUSINESS

'India set to attract $40b in FDI in 2008-09'


August 26, 2008 | PTI

NEW DELHI: India is set to attract foreign direct investment of $40 billion in fiscal 2008-09 with overseas investors betting big on the manufacturing sector in world's second fastest growing economy. The country received $20 billion foreign direct investment (FDI) between January and June in the calendar 2008 and $10 billion in the first quarter of the current fiscal. "Going by this, achieving $40 billion in 2008-09 does not seem unrealistic," secretary in the department of Industrial Policy and Promotion Ajay Shankar said. INDIA-BUSINESS

FDI in LLPs may be allowed without caps


July 18, 2010 | PTI NEW DELHI: Foreign direct investment in new form of business, limited liability partnerships (LLPs), could be allowed without a cap, a highly placed source said. "The officials have reached a consensus for 100 per cent FDI in LLPs," he said. Officials in the ministries of industry, finance and corporate affairs have been in regular consultations on the issue of allowing foreign direct investment (FDI) since the LLP form of business was notified in 2009. INDIA

FDI cap drives a wedge in saffron parivar


July 14, 2004 | TNN NEW DELHI: Caught between the reforms lobby and its swadeshi loyalists, not to mention recalcitrant allies, the BJP found itself a divided house on Tuesday. The key question at a meeting of its parliamentary wing was whether the party should back the hike in sectoral caps for foreign direct investment (FDI) or oppose it? It has now put off taking a official view till ? as party president Venkaiah Naidu suggested ? it has thrashed out the matter internally as well as with allies so that it knows which way to vote when the Insurance Regulatory Development Authority (Amendment) INTERNATIONAL-BUSINESS

Sachs concerned over Indian FDI flow


September 19, 2001 washington: renowned harvard economist jeffrey sachs said depressingly low flow of foreign direct investment into india was "clearly a matter of significant policy concern" for the vajpayee government. "the fact that india trails china so much in attracting fdi is a matter of significant policy concern for india, because it is missing a lot of markets and a lot of capital investment that should be going there and losing it to china," said sachs at a video conference on unctad's annual world investment report. INDIA-BUSINESS

HLL, Tata welcome 100% FDI in tea sector


June 25, 2002 | PTI MUMBAI: Hindustan Lever and Tata Tea on Tuesday welcomed government's decision to allow 100 per cent foreign direct investment in the tea sector, including plantation. "The tea plantation sector requires major investments in terms of replanting and tea processing facilities," an HLL release said, adding given the current economies, local investors would not have found such investment remunerative. Foreign direct investment would also enable stronger linkages between tea plantations in India and tea marketers outside the country, providing avenues for sustainable exports, the release said. INDIA-BUSINESS

100% FDI allowed in facsimile editions of foreign newspapers


January 14, 2009 | PTI

NEW DELHI: As a major policy reform, the government on Wednesday announced 100% foreign direct investment in the facsimile editions of foreign newspapers, provided the investment is held directly by the owners of original publication. "The policy of foreign direct investment in the publication of facsimile edition of foreign newspapers include permitting 100% FDI with prior approval of the government, provided the FDI is by the owner of the foreign newspaper...," an official release said. INDIA-BUSINESS

Dubai crisis manageable, not to hurt India: World Bank chief


December 5, 2009 | PTI NEW DELHI: World Bank group president Robert Zoellick on Saturday said the Dubai debt crisis is manageable and it would not affect India. "I personally think that the Dubai financial problem would be contained and is manageable. I don't think it to have an effect on Indian markets," Zoellick said. Zoellick was talking to reporters in the national capital after a meeting with policy makers, including Reserve Bank governor D Subbarao and Planning Commission deputy chairman Montek Singh Ahluwalia. INTERNATIONAL-BUSINESS

Canada wants more access to Indian markets


October 28, 2006 | PTI TORONTO: Seeking to boost its commercial relationship with India, Canada has demanded more access to "key" markets in the country including in agriculture and retail sector. Canadian Foreign Minister Peter Mackay said that his country has formulated a commercial strategy to boost trade and investment relationship with India. But "there are many obstacles to gaining access to Indian market. A number of barriers remain in financial, agri-food and agriculture sectors," the minister said at a function organised by the Canada India Business Council on Thursday. INDIA-BUSINESS

Govt sees $30b FDI in 2007-08


April 26, 2007 | PTI NEW DELHI: The Government on Wednesday said it is aiming at $30 billion in foreign direct investment this year on the back of huge interest in the country from auto and electronics manufacturers. "We are toying with the idea of keeping a goal of $30 billion of foreign direct investment in the current year, of which $26 billion would be through investments in equity, while the rest will be from reinvested earnings," secretary in the Department of Industrial Policy and Promotion Ajay Dua said. INDIA-BUSINESS

FDI scales $10b in Q1, says RBI


August 18, 2008 | PTI MUMBAI: India is fast catching up with China in the flow of Foreign Direct Investment as capital inflows through this route has crossed $10 billion in the first quarter of this fiscal. Foreign Direct Investment (FDI) in the first quarter of FY 2009 has far exceeded the total FDI flows received by the domestic economy in 2005-06, Reserve Bank data said. The RBI has also said that the strong domestic demand is likely to push up the private corporate investments in the current financial year but in a slower-pace owing to deceleration in global and domestic economies. CHANDIGARH

FDI in multi-brand retail: NDA opposes, ally SAD backs move


November 26, 2011 | TNN NEW DELHI: Supporting the Centre's move to allow foreign direct investment in multi-brand retail sector, Shiromani Akali Dal president Sukhbir Singh Badal has said the initiative will offer tremendous benefits to farmers and people of Punjab. Shiromani

Akali Dal (SAD) is an important ally of National Democratic Front ( NDA), which has been strongly opposing foreign investment in multi-brand retail sector. In a letter to commerce and industry minister Anand Sharma on Thursday, Badal said, "We strongly believe that opening FDI in multi-brand retail will bring in expertise, experience and resources of foreign retailers. PUNE

Merchants oppose FDI in retail sector


November 23, 2011 | TNN PUNE: About 400 merchants from across the state gathered in the city on Tuesday for a one-day discussion on 'the impact of government policies on their business'. The meet was organized by the Poona Merchants' Chamber. The invitees unanimously opposed foreign direct investment (FDI) in the retail sector. They rued that the existing taxation regime is not encouraging business. "Once FDI is allowed, domestic business will suffer more; it will wipe out the small trader completely. PUNE

Akhil Bharatiya Grahak Panchayat to focus on FDI, water policy


April 25, 2012 | TNN PUNE: The Akhil Bharatiya Grahak Panchayat, a national consumer body would focus its attention on foreign direct investment (FDI) and water policy-2012 in the immediate future. A two-day national convention of the Panchayat was held in the city recently, where issues related to gross domestic production, standard of living, revision of poverty line and various parameters considered while defining lifestyle were discussed . The consumer organization plans to undertake various awareness programmes about FDI and water policy. OPEN-SPACE

What is round tripping?


October 5, 2008 Round tripping has several meanings. In finance, it refers to money that leaves the country, often routed to the diaspora, making its way back to the country in the form of foreign direct investment. It also refers to a company that sells an unused asset to another company, while agreeing to buy it or a similar asset at the same price. This is also referred to as Lazy Susans. In technology, round tripping refers to the repeated conversion of a document from one format to another -- for instance, a rich text format to a doc format and so on. This sort of round tripping may affect the quality of the content. INDIA-BUSINESS

Insurance can draw more capital than retail


November 26, 2011 | Mayur Shetty , TNN MUMBAI: Liberalization of foreign investment in insurance, which has been hanging fire for several years, has the potential to draw in more capital immediately than relaxation of foreign direct investment in retail. On Thursday, the government approved FDI of up to 51% in multi-brand retail and 100% in single-brand retail. The move is seen as a big positive for the sector and also for improving overall investor sentiment in favor of India. There are estimates that the opening up of retail would draw in up to $10 billion in foreign direct investment. INDIA

FDI in retail: Uproar in Parliament


November 25, 2011 | PTI NEW DELHI: Government on Friday informed Parliament that it has allowed 51 per cent FDI in multi-brand retail, a decision which faced strong criticism, including from key UPA ally Trinamool Congress. In a statement, commerce and industry minister Anand

Sharma said both in the Lok Sabha and Rajya Sabha that the policy on single brand retail has also been liberalised, removing the 51 per cent cap on foreign direct investment (FDI). Allowing FDI in multi-brand retail, which is dominated by neighbourhood stores, will be subject to riders including a minimum investment of USD 100 million (Rs 5,200 crore)

With strong governmental support, FDI has helped the Indian economy grow tremendously. But with $34 billion in FDI in 2007, India gets only about 25% of the FDI in China.
Foreign direct investment (FDI) in India has played an important role in the development of the Indian economy. FDI in India has in a lot of ways enabled India to achieve a certain degree of financial stability, growth and development. This money has allowed India to focus on the areas that needed a boost and economic attention, and address the various problems that continue to challenge the country. India has continually sought to attract FDI from the worlds major investors. In 1998 and 1999, the Indian national government announced a number of reforms designed to encourage and promote a favorable business environment for investors.

FDIs are permitted through financial collaborations, through private equity or preferential allotments, by way of capital markets through euro issues, and in joint ventures. FDI is not permitted in the arms, nuclear, railway, coal or mining industries.
A number of projects have been implemented in areas such as electricity generation, distribution and transmission, as well as the development of roads and highways, with opportunities for foreign investors. The Indian national government also granted permission for FDIs to provide up to 100% of the financing required for the construction of bridges and tunnels, but with a limit on foreign equity of INR 1,500 crores, approximately $352.5 million. Currently, FDI is allowed in financial services, including the growing credit card business. These also include the non-banking financial services sector. Foreign investors can buy up to 40% of the equity in private banks, although there is condition that these banks must be multilateral financial organizations. Up to 45% of the shares of companies in the global mobile personal communication by satellite services (GMPCSS) sector can also be purchased. In 2007, India received $34 billion in FDI, a huge growth compared to the previous years, but significantly less than the $134 billion that flowed into China. Although the Chinese approval process is complex, China continues to outshine India as a choice destination for foreign investors. Why does India, a country with resources and a skilled workforce, lag so far behind China in FDI amounts?

Physical infrastructure is the biggest hurdle that India currently faces, to the extent that regional differences in infrastructure concentrates FDI to only a few specific regions. While many of the issues that plague India in the aspects of telecommunications, highways and ports have been identified and remedied, the slow development and improvement of railways, water and sanitation continue to deter major investors. Federal legislation is another perverse impediment for India. Local authorities in India are not part of the approval process and the large bureaucratic structure of the central government is often perceived as a breeding ground for corruption. Foreign investment is seen as a slow and inefficient way of doing business, especially in a paperwork system that is shrouded in red tape.