FDI Essay Example | Topics and Well Written Essays - 750 words

FDI - Essay Example ssets in a domestic facility.2 In a foreign direct investment scenario there are normally two parties that are involved; the foreign affiliate and the parent business enterprise when the two are combined they form the multinational company. For instance, if a United Kingdom company decides to make a takeover of the majority stake in a South African and thus assumes its operations then that is a typical example of a foreign direct investment. The South African firm is the parent business company while the UK Company is the international business affiliate for that particular investment. However, that is not the only form that foreign direct investment has to be conducted it can take varied form depending on the interests of the parties concerned, as well as the environment of that particular investment.3 There are two primary types of foreign direct investment namely; inward foreign direct investment and outward foreign direct investment. Inward foreign direct investment occurs when there is an investment of foreign capital in the local resources. For instance, a Canadian firm takes over a significant stake in United Kingdom mining company and thus assumes its operations. Countries are making efforts to attract inward foreign direct investment since they stimulate economic growth as well they inject new capital into the economy thus making it more robust.4 Various countries implement different foreign direct investment regimes depending on their need to attract foreign investments in their economy. Some of the common factors that determine growth of inward foreign direct investment include; tax breaks from the government in that sense that foreign firms are allowed tax relaxation to a certain extent to encourage more inward investment for foreign based organization. Low-interest rates are yet another collective initiative that governments implement to facilitate the uptake of inward foreign investment from overseas companies in order to stimulate the local