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4.5 The role of Foreign Direct Investment (FDI) Introduction

In defining Foreign Direct Investment you must understand it is not the same as Portfolio Investment or saving in another country´s bank or government (eg buying Cvt Bonds). Portfolio investment (see balance of payments - Financial Account) is to do with buying debt or paper assets such as shares.

Foreign Direct Investment

is funding the operations of existing businesses in a developing country from abroad and/or funding the start up of a new business in the developing country.

See next page for more sophisticated definitions but always be aware of the above description.