According to the WTO, FDI occurs when an investor based in one country [ the home country ] acquires an asset in another country [ The host country ]with the intent to manage that asset . “This definition stresses that FDI as an asset.The United Nations Conference on Trade and Development [ UNCTAD ] defines FDI as an investment involving a long term relationship and reflecting a lasting interest and control by a resident entity [ the foreign direct investor or parent enterprise ] of one country in an enterprise [ foreign affiliate ] resident in a country other then that of the foreign direct investor.” This definition does not tell us what exactly an investment is. The international monetary fund defines FDI as capital in any of the following three forms equity capital. This is the value of a foreign investor’s investment in share of an enterprise in a foreign country. An equity capital stake of 10 percent or more of the ordinary shares or voting power in an incorporated enterprise, or its equivalent in an unincorporated enterprise,is normally considered as a threshold for the control of assets. This category includes both mergers and acquisitions [ M & As ] and ” greenfield ” investment [ the creation of new facilities ].
Reinvested earnings are a transnational corporation’s [ TNC ] shares of affiliate earnings not distributed as dividends or remitted to the TNC. Such retained profits by affiliates are assumed to be reinvested in the affiliates . Reinvested earnings can represent up to 60 per cent of the total outward FDI from countries such as the United Nations and the United Kingdom.