Foreign direct investment (FDI) can generate employment, raise productivity, transfer skills and technology, enhance exports and contribute to the long-term economic development of the world's developing countries. More than ever, countries at all levels of development seek to use FDI for development.
What is FDI?
Foreign direct investment (FDI) is defined as an investment involving a long-term relationship and reflecting a lasting interest and control by a resident entity in one economy (foreign direct investor or parent enterprise) in an enterprise resident in an economy other than that of the foreign direct investor (FDI enterprise or affiliate enterprise or foreign affiliate).
FDI implies that the investor exerts a significant degree of influence on the management of the enterprise resident in the other economy. Such investment involves both the initial transaction between the two entities and all subsequent transactions between them and among foreign affiliates, both incorporated and unincorporated. FDI may be undertaken by individuals as well as business entities.
Flows of FDI comprise capital provided (either directly or through other related enterprises) by a foreign direct investor to an FDI enterprise, or capital received from an FDI enterprise by a foreign direct investor. FDI has three components: equity capital, reinvested earnings and intracompany loans.
What does UNCTAD do in FDI and Development?
To increase understanding of issues related to FDI and enhance its benefits for developing countries, particularly the least developed countries (LDCs), UNCTAD analyses FDI trends and their impact on development; compiles data on FDI; provides advisory services and training on international investment issues; helps developing countries improve policies and institutions that deal with FDI; and helps these countries participate in international negotiations on investment.
