FDI: Broadly speaking, foreign private capital flows come in two forms: equity and debt. The largest type of equity flow, in fact the largest of all capital flow to developing as well as transitional countries, is foreign direct investment (FDI). FDI is generally a long term investment that involves significant management control. The World Bank defines FDI as investment made to acquire a lasting management interest (usually at least 10 percent of voting stock) in an enterprise operating in a country other than that of the investor. With FDI, equity holders are concerned with their returns over a period of years rather than weeks or months.
FDI is aimed at a very wide range of economic activities, making generalization difficult, but at least three broad groups can be identified. First, from a historical perspective, the largest share of FDI has been in activities related to a country's natural resource endowments, such as mining, agricultural production, and tourism. Second, some FDI in manufacturing is aimed at producing for the domestic market in the host developing country often with protection against competing imports. Third, an increasingly large share of FDI in recent decades has focused on firms engaged in labor-intensive manufacturing aimed for export on world markets.
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