What does the term "foreign direct investment" (FDI) refer to?

The term "foreign direct investment" (FDI) specifically refers to the investment made by a company or individual in one country in business interests within another country. This investment typically involves a significant degree of control and influence over the foreign business operations. FDI can take various forms, including setting up new operations, acquiring existing businesses, or expanding existing investments in foreign countries.

This distinction is critical because FDI usually implies a long-term interest and commitment in the foreign market, which is different from other types of investment that might not engage as deeply with the local economy. For example, a company may choose to invest abroad to access new markets, resources, or technologies, or to optimize their production processes by taking advantage of cheaper labor or materials overseas.

The other options do not accurately represent the concept of foreign direct investment. Investments made by governmental bodies are not classified as FDI in the same context, as they often relate to development assistance or strategic interests without a significant control stake. Investments limited to domestic industries do not fit the definition of FDI as they pertain strictly to investments within a single country. Lastly, investments in real estate only do not encompass the broader scope of FDI, which includes a variety of business ventures, not just property.