What type of fund movement does Foreign Direct Investment involve?

Foreign Direct Investment (FDI) involves a significant capital transfer aimed at establishing or acquiring business operations in a foreign country. This type of investment typically means that an investor or a company is not merely transferring funds for short-term financial gains, but is instead committing substantial resources to create or purchase a lasting business interest. Such actions may include building factories, purchasing existing businesses, or expanding operations.

This long-term commitment distinguishes FDI from other forms of capital movement, such as portfolio investment, which often involves buying stocks or bonds without a direct influence over the business operations. FDI plays a crucial role in facilitating economic development, enhancing productivity, and generating employment in host countries, as it often leads to technology transfer and improvements in managerial practices.