Understanding Foreign Direct Investment

This video explains the key concepts of Foreign Direct Investment (FDI).

Understanding foreign direct investment foreign direct investment or fdi refers to a long-term investment by an investor in an enterprise in another economy resulting in lasting interest with significant influence over the overseas enterprise fdi typically occurs through mergers and acquisitions or setting up of business operations by the investor in a foreign

Economy the investor is known as the direct investor while the overseas enterprise is known as the direct investment enterprise for example when a company based in singapore invests in an enterprise domiciled overseas the singapore-based company is the direct investor and the overseas firm is the direct investment enterprise the transactions captured will be

Recorded in singapore’s outward fdi conversely inward fdi is recorded when a foreign direct investor invests in singapore how is fdi measured fdi is measured by the sum of three components equity capital invested by the direct investor in the direct investment enterprise retained earnings accrued to the direct investor which are earnings generated by the direct

Investment enterprise after deducting the dividends payable to the direct investor and net inter-company loans between the direct investor and the direct investment enterprise fdi is typically positive but in some instances could be negative such as when the value of loans from the direct investment enterprise to the direct investor is larger than the loans

From the direct investor to the direct investment enterprise for example a singapore-based company’s outward fdi in another economy in the asean region will include the equity capital invested by the singapore-based company in an enterprise in that asean member state retained earnings recorded by this enterprise as well as net inter-company loans between the

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Singapore-based company and the enterprise let us visualize how fdi can change over time in year one company x which is based in singapore invested 50 million dollars in equity capital in company y domiciled in a foreign economy resulting in singapore’s outward fdi stock increasing from zero dollars to 50 million dollars by the end of the year in the following

Year another 10 million dollars is invested in equity capital raising the fdi stock to 60 million dollars as at the end of year two in year three company x lends 40 million dollars in intercompany loans to company y raising singapore’s outward fdi stock to 100 million dollars as at the end of year three with 10 million dollars in earnings at the end of tier 4 and

Dividends payable amounting to 4 million dollars the fdi stock at the end of tier 4 stands at 106 million dollars what are the benefits of fdi the host economy benefits from fdi through job creation as well as knowledge and technological transfers for investors undertaking fdi helps them build distribution networks and gain access to new technologies or natural

Resources singapore’s inward fdi has grown considerably since the early 1970s foreign multinational enterprises have been actively investing in singapore which contributed to our economic expansion over the years as singapore’s economy grew outward fdi has become increasingly pivotal to our growth strategy more companies based in singapore internationalized

To seek new opportunities abroad for more information on foreign direct investment statistics its related concepts and methodologies visit www.singstat.gov.sg you

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Transcribed from video
Understanding Foreign Direct Investment By Singapore Department of Statistics (DOS)