For an investment to be deemed as a foreign direct investment, it needs to involve a person or a business entity owning 10% or more of a company set in a country different from the investor’s origin. When the investing party can only secure less than 10% of ownership of said company, it would be referred to as their stock portfolio instead, as defined by the International Monetary Fund. At 10% ownership, the investing party does not have that big of power to control the entire interest of the company. However, it makes it possible for the investor to influence on said company’s policies, operations, and management.
According to the UN, the total amount of foreign direct investment hit the $1.52 trillion mark globally in 2017. The number was a 16% drop from the previous year’s $1.8 trillion. This decline can be attributed to a 27% drop in several developed countries. For developing and emerging market countries, foreign direct investment is crucial and critical. The companies in countries in question require multinational supports in order that they can expand their sales internationally. Establishing infrastructure, energy, and things related to industry sector requires funding to improve wages and job opportunities.
Developing countries enjoyed a total of 37% of global FDI in 2017—as many as 43 of worldwide investment were given to those developing countries. In Asia, investments spiked to 2%, making it a region of the world with the largest investment received. It does not mean that countries with developed economy such as Europe and the US do not need FDI, although they may require so for different reasons. Investments in such countries take the form of mergers and acquisitions among companies that are mature. Investments on the global corporation level are intended for restructuring core business or refocusing target or aim.