International investment or capital flows fall into four principal categories: commercial loans, official flows, foreign direct investmentThis 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. (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.), and foreign portfolio investmentFPIFPI 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. 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. (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.).

Commercial loans, which primarily take the form of bank loans issued to foreign businesses or governments.

Official flows, which refer generally to the forms of development assistance that developed nations give to developing ones.

Foreign direct investmentThis 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. (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.) pertains 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.

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. is calculated to include all kinds of capital contributions, such as the purchases of stocks, as well as the reinvestment of earnings by a wholly owned company incorporated abroad (subsidiary), and the lending of funds to a foreign subsidiary or branch. The reinvestment of earnings and transfer of assets between a parent company and its subsidiary often constitutes a significant part 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. calculations.

According to the United Nations Conference on Trade and Development (UNCTAD), the global expansion 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. is currently being driven by over 64,000 transnational corporations with more than 800,000 foreign affiliates, generating 53 million jobs.

An investor’s earnings on 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. take the form of profits such as dividends, retained earnings, management fees and royalty payments.

Foreign portfolio investmentFPIFPI 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. 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. (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.), on the otherhand is a category of investment instruments that is 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 which does not necessarily represent a long-term interest.

Stocks:

• dividend payments
• holder owns a part of a company
• possible voting rights
• open-ended holding period

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.:

• interest payments
• ownership of bond rights only
• no voting rights
• specific holding period

While 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. tends to be commonly undertaken by multinational corporations, 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. comes from my diverse sources such as a small company’s pension or through mutual funds held by individuals.

The returns that an investor acquires on 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. usually take the form of interest payments or dividends.

Investments in 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. that are made for less than one year are distinguished as short-term portfolio flows. 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. flows tend to be more difficult to calculate definitively, because they comprise so many different instruments, and also because reporting is often poor. Estimates on 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. totals generally vary from levels equaling half 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. totals, to roughly one-third more than 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. totals.

The difference between 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. and 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. can sometimes be difficult to discern, given that they may overlap, especially in regard to investment in stock. Ordinarily, the threshold for 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. is ownership of “10 percent or more of the ordinary shares or voting power” of a business entity (IMF Balance of Payments Manual, 1993).

Until the 1980s, commercial loans from banks were the largest source of foreign investment in developing countries. However, since that time, the levels of lending through commercial loans have remained relatively constant, while the levels of global 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. and 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. have increased dramatically. Over the period 1991-1998, 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. and 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. comprised 90 percent of the total capital flows to developing countries. Over the period of 1996-2006, 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. and 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. outflows from the United States more than doubled.⁵

Similarly, when viewed against the tremendous and growing volume 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. and 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., the funds provided in the past by governments through official development assistance, or lending by commercial banks the World Bank or IMF, are diminishing in importance with each passing year. Therefore, when one talks about the recent phenomenon of globalization, one is referring in large part to the effects 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. and 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., and these two instruments will therefore be the primary focus of this Issue in Depth.

5 Source: http://www.imf.org/external/pubs/ft/gfsr/2007/02/

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