A positive side effect of helping entrepreneurs get started is the creation of jobs, which leads to increased income levels and thereby to increased consumer demand. Such demand in turn triggers opportunities for other enterprises and, through this multiplier effect, the capital that comes with foreign investment often helps produce economic growth.

This pattern also applies in developed countries. The world’s largest recipient of foreign investment is the United States. Over the past several decades, the hundreds of billions of dollars of foreign capital that has been invested in the United States has been of tremendous benefit to the U.S. economy, strengthening the dollar, and helping to bring down interest rates by increasing the supply of capital for loans to business and individuals.

As a result of foreign investment, the US economy is no longer a “domestic” economy in the traditional sense. According to United Nations Conference on Trade and Development, in 2006 the total stock of U.S. investment from domestic capital sources was 13.5 percent of total annual gross domestic product (GDP) and the balance of existing investment in the United States was financed from foreign sources.

In 2007, there was US$175 billion of FDIThis category refers to international investment in which the investor obtains a lasting interest in an enterprise in another country. Most concretely, it may take the form of buying or constructing a factory in a foreign country or adding improvements to such a facility, in the form of property, plants or equipment. in the U.S, and an 88 percent  increase in FDIThis category refers to international investment in which the investor obtains a lasting interest in an enterprise in another country. Most concretely, it may take the form of buying or constructing a factory in a foreign country or adding improvements to such a facility, in the form of property, plants or equipment. inflows to North America as a whole (to $244 billion).⁹ As of June 2009, there are over 9 trillion dollars’ worth of foreign FPIFPI is a category of investment instruments that are more easily traded, may be less permanent, and do not represent a controlling stake in an enterprise. These include investments via equity instruments (stocks) or debt (bondsA certificate issued by a government or company representing a promise by the bond issuer to pay the bondholder interest in addition to the principal amount of the bond after a specified period of time. For example, a 10-year bond purchased today costs . When you “redeem” or cash in the bond after ten years, the issuer repays the principal plus interest at a rate established when the bond was issued.) of a foreign enterprise that does not necessarily represent a long-term interest. in the U.S. ¹⁰  This shows that even the U.S. economy is heavily reliant on foreign capital inflows, which have led to the establishment of new industries as well as job creation in the United States.

The figures below show the source regions and target sectors of direct investment from other parts of the world to the United States as of 2009.¹¹   

9  Source: United Nations Conference on Trade and Development, World Investment Report 2007

10  Source: http://treas.gov/tic/shlhistdat.html

11 Source: http://www.bea.gov/international/di1fdibal.htm.

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