What to Know About Foreign Direct Investment
Foreign Direct Investment is the buying and selling of foreign currencies. It is very much similar to
an individual direct investment. However, the main difference between the two is that the latter has the
advantage of being able to grow at a faster rate due to the currency exchange rate fluctuations. Direct
foreign investment is an investment in the form of direct ownership in a specific business in a foreign
country by an international entity typically based in another country. It is therefore distinguished from
foreign portfolio investment, by a concept of direct influence. Both have their advantages and
Foreign Direct Investment Explained
Dividing up foreign direct investments is quite complex. If there is one thing to be noted about such
investments, it is that they are often sensitive to sudden changes in financial markets. They usually
involve large sums of money that need to be stored in foreign currency, so care is taken to ensure that
the same interest rate or exchange rates are applied to all the currencies owned by the entity investing.
An enormous amount of paperwork is required, as the investor needs to make sure that he receives his
fair share of profit from the company he has put his money in. If the market suddenly fluctuates out of
the investor’s favor, he may lose a huge amount of his money.
The best example of foreign direct investment which involves technology is the Indian tech industry.
India has become extremely famous for manufacturing several cutting-edge technologies like software,
hardware, cell phones, and electronics. A large number of multinational companies from Japan, China,
and the United States are investing in India, which is helping them develop new products and services
and cut costs by not buying from their home countries. Indian companies are also very successful at
selling their products internationally because of their excellent marketing skills.
Another field receiving considerable foreign direct investment in the oil and gas sector. Because of the
huge profits involved, oil and gas sector investments are always a safe bet. However, because this kind
of business is speculative, the investors need to exercise caution while choosing their ventures. Several
factors must be taken into consideration before such investments are carried out: the country’s track
record on developing oil and gas, its political stability, and its infrastructure.
Hymer Energy, a Swedish oil company, is another popular example of foreign direct investment into
Hymer technologies. Hymer produces high-quality lubricants, which are used in many different
applications. The company’s primary concern is the promotion of cleanliness in the industry, specifically
by promoting greener energy sources. Swedish furniture maker Ikea is another important company that
receives Hymer’s Hynergy technologies, which use water-based cleaning solutions to make furniture
more hygienic. Ikea’s green initiative has helped it receive several awards and has achieved remarkable
success so far.
Global brands like Volvo and DPE have successfully leveraged their market power to gain significant
interests. Volvo’s global investment in Hymer technology saw it acquire a 40% stake in the company. At
present, Volvo is the biggest shareholder in Hymer. International portfolio investment can be a great
way of increasing your company’s revenue and market share while generating greater cash flow and
market value for your portfolio. For this reason, many companies that don’t necessarily feature on your
portfolio have turned to international direct investment.
A great example of international investment into Russia is the purchase of stakes in various state-owned
oil companies by a British company, FDI in Russia. Though it was an expensive purchase, the price was
well worth it considering the long-term benefits to FDI. As part of its marketing strategy, FDI in Russia
marketed itself as an excellent investment opportunity for foreigners with a highly professional network
and deep pockets. A major portion of the investment into FDI was invested in oil and gas.
When it comes to potential foreign direct investment, Russia has never been lacking. There are many
opportunities for direct investment across various sectors such as mining, infrastructure development,
and financial services. Some of the companies that have recently considered investing in Russia include
Anglo American, Schlumberger, CitiBank, Pimco, Morgan Stanley, COMEX, Exxon, and Credit Suisse.
If you would like to learn more US foreign direct investment, then contact Enclave Capital today or call us at 347-380-9220.