The following is my
answer to a Quora question: “Does
FDI include financial investments such as portfolio investment?”
Foreign Direct Investment (FDI) is defined as a
controlling stake, in a business entity in one country, by an entity based in
another country. This may be done by an
investor establishing a foreign business operation, or by acquiring a foreign
business asset, including through establishing ownership or taking a controlling
interest in that firm.
FDI is distinct from a portfolio investment, where an
investor merely purchases an equity stake in a foreign entity. They do not have a controlling interest, and
the company is not a foreign subsidiary of a business they own. They are pure investors. As such, it is no FDI.
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