"
Foreign investment is defined as the purchase of assets in Country A by residents of Country B. It is usually divided into two categories:
Foreign Direct Investment (FDI). This refers to investment where the foreign investor (from Country A) owns or controls the assets (in Country B). Examples include the building of a factory in the United States by a Japanese car manufacturer or a foreign takeover of an American firm. (For example, Burger King and Pillsbury are both owned by the British company Diageo).
Foreign Portfolio Investment. This refers to investment where a foreign resident provides the capital, but the activity is owned and operated by domestic residents. An example would be the purchase of a small number of shares in Microsoft by a Canadian investor or the purchase of U.S. government bonds by a British pension fund.
(Progressive Policy Institute, Bates, Jenny,
International Capital Flows, Foreign Investment, and Trade, 1999, visited 2010-07-29)
Foreign investment is "contrasted with portfolio investment where there is a movement of money for the purpose of buying shares in a company formed or functioning in another country, the distinguishing element being that, in portfolio investment, there is a divorce between management and control of the company and the share ownership in it."
(Sornarajah, M.,
The International Law on Foreign Investment, Cambridge University Press, 1994, visited 2010-07-29)
