Foreign direct investment (FDI) is an investment from a party in one country into a business or corporation in another country with the aim of establishing a lasting interest. Keep in mind the lasting interest is aimed at differentiating FDI from foreign portfolio investments, where investors passively old securities from a foreign country.
A foreign direct investment can be made by obtaining a lasting interest or by expanding one’s business into a foreign country. In this quick guide, we examine some of the things you should look about foreign direct investment.
Method of Foreign Direct Investment
By now you should be aware of the fact that an investor can make a foreign direct investment by expanding their business in a foreign counting. Reinvesting profits from overseas operations, as well as intra-company loans to overseas subsidiaries are also regarded as foreign direct investments.
Of course, there are multiple methods for a domestic investor to acquire voting power in a foreign company. Some of the most common examples include acquiring voting stock in a foreign company, mergers and acquisitions, joint ventures with foreign corporations and starting a subsidiary of a domestic firm in a foreign country.
Types of Foreign Direct Investment
Actually, there are two main types of Foreign Direct Investment (FDI) i.e.; horizontal and vertical FDI. In a nutshell, horizontal foreign investment happens when a business expands its domestic operations to a foreign country. In this case, the business conducts similar activities but in a foreign country.
With vertical foreign investment, a business expands into a foreign country by moving to a different level of the supply chain. In other words, a firm conducts different activities abroad but these activities are still related to the main business.
However, two other forms of FDI have also been observed: conglomerate and platform FDI. Be sure to better understand what each one of them entails before you finally leverage what foreign investment opportunities offer investors.
Before you know it, you’ll be enjoying the numerous benefits accompany Foreign Direct Investment (FDI) in Bahrain or in any other part of the world.
