There are four different types of foreign investment. These are foreign direct investment (FDI), foreign portfolio investment (FPI), official flows, and commercial loans. These types of foreign investments vary mainly in the loan and how the investor is engaged in the loan recipient.
FDI occurs when a company invests in a business that is located in another country. For private foreign investment, which will be considered for FDI, a company that invests must have at least 10% of shares owned by foreign companies. These international business relations, the company has invested is known as the parent company, while the foreign company is known as a subsidiary of the parent company. Transnational corporations, which are distributed among several countries often start with FDI.
FDI in Foreign Investments
FPIs also occur when foreign investments are made now. They can also be made by a person who has a mutual funds. Whereas FDI allows the company to an investor holding shares of a subsidiary of FPI may be more temporary in nature. The investment instruments such as stocks and bonds generally traded on FPI. Stocks and bonds are examples of investments that can be easily traded. The company, which has shares and bonds of foreign companies do not necessarily have a stake in this company in which to invest.
For foreign investments, known as the official flow occurs between countries rather than between companies. In the case of official flows more developed and economically prosperous nation will invest in a country that is less developed. The recipient country’s official investment flow, tend to get financial support, as well as more high-end technology and assistance in governance and economic management.
Commercial loan is a type of foreign investment, which usually occurs in the form of a bank loan. may appear such investment between countries or between companies which are in different countries. While commercial loan can be done by an individual, it usually happens between the larger organizations.
Commercial loans are the most common type of foreign investment up to 1980, particularly in those cases in which the investment will cost companies and governments of developing countries. Since FDI and FPI were much more common. The term globalization is commonly used to describe the phenomenon of the increased use of FDI and FPI. While commercial loans issued by banks and backed by the government FPI and FDI, private investment.