Read the lesson in English  
then translate to your own language to verify your understanding.

Foreign Direct Investment | English Lesson

Oct 21, 2021

Our topic today? Foreign Direct Investment, also known as FDI.


Economic territory: the areas under the effective economic control of a single government.

Residence: the economic territory where the enterprise has its main economic interest.

Foreign Parent: A foreign parent an owner residing outside the host country which has at least 10 percent ownership in the enterprise.

Inward Flow: This measure captures FDI from one market to the host country.

Outward Flow: This measure captures FDI from the source to a foreign country.

Okay well, most economists agree that foreign direct investment, or FDI, is beneficial for the economic development of the host country and friends.

By host country, I mean the economic territory that receives the investment: The host country. Another use of the word host, for example, is if you have people over to your house, you are the host. So the host country.

Well, the benefits of FDI are many and can include the creation of new jobs, especially if the investment is used for the construction of new projects.

Also, for developing economies, FDI can be key for bringing new technology into the country. Some countries benefit more from FDI than others because the nature of the investment can create an important multiplier effect.

For example, through the use of local production of materials for construction. So FDI can result in an important multiplier effect.

Well, it’s possible to identify the direct impact of FDI on economic development through the national accounts. However, FDI could also have many indirect impacts that are more difficult to capture, such as the development of human capital. And by human capital, I mean people’s skills, their knowledge.

New companies that come from abroad can come with training and teach people new skills.

So the development of human capital.

Generally speaking, developing economies receive a net inward flow of FDI and developed economies a net outward flow. That makes sense, richer countries invest in poorer countries where local funding is scarce.

For example, in a country with plentiful natural resources, a large investment could be necessary to develop them. And if it’s a developing economy, perhaps they need that funding from abroad.

Well, what can be some of the disadvantages of FDI?

The disadvantages of FDI could be that the revenues from the investment don’t necessarily stay in the economic territory.

By that I mean the host economy but rather these revenues flow across the border to the foreign parent and the foreign parent is in another country.

Of course, now depending on the scale of the economy of the host country the outward flow of profit remitted to the foreign parent can even provoke a trade deficit.

Okay, well, let’s look at our vocabulary one last time:

Economic territory: the areas under the effective economic control of a single government. Economic territory

Residence: the economic territory where the enterprise has its main economic interest. By the way, the house or the apartment where you live, that is your residence. So residence we also use in economic terms

Foreign parent: a foreign parent is an owner residing outside the host country which has at least 10% ownership in the enterprise 10% or more known as a foreign parent.

Inward flow: well, that’s the measure that captures the foreign direct investment from one market to the host country.

Outward flow: well, this is the measure that captures foreign direct investment or FDI from the source to a foreign country.

Okay, friends, that’s all for today.

The English for economists podcast is new so this is a good time to share it with your friends and colleagues.

 Also, if you have any suggestions or comments or maybe you’re interested in some English classes, contact us. I would very much enjoy hearing from you.

So until next time, this is Alan Robert at English for economists wishing you a fantastic day.

Take care, bye.

What do you think of this lesson?
Do you have any questions or concerns?
Let us know.


Submit a Comment

Your email address will not be published. Required fields are marked *


Latest Posts

Latest Podcasts

Breakthrough at Talks Spurs Concessions

Breakthrough at Talks Spurs Concessions

Listen to this headline that was published in a newspaper called The Business Standard. Listen closely because this headline is tricky to understand and it contains a lot of information. Breakthrough in Venezuela Talks Spurs US to Ease Embargo Listen again:...

Counterfeit Jewelry

Counterfeit Jewelry The headline we will use for this class was published in the New York Times on November 21st, 2022. Jewelry Counterfeits: The Age-Old Problem Just Keeps Growing Jewelry counterfeits. What’s that? Jewelry 'are' those...

Collapse of the FTX Crypto Exchange

Collapse of the FTX Crypto Exchange

Welcome to English for Economists, the podcast meant for people working in economics who want to improve their English using real-world, contemporary examples. In this English lesson, we will look at some vocabulary surrounding the recent collapse of FTX, a large...

Windfall Taxes

Windfall Taxes

To understand the word ‘windfall’, it's useful to break it into two parts ‘wind’ and ‘fall’. The wind is the natural movement of air. Wind blows. If the wind blows hard enough, it can make things fall. For example, the word windfall ––which was first used back in the...

Fintech Financing Slump

Fintech Financing Slump

We draw our English lesson today from the Economist Magazine once again, which published an excellent article on October 13th, 2022, titled: Who will survive the fintech bloodbath? Bloodbath! That sounds serious, doesn’t it? Well, it’s not a literal bath of blood, but...

Are Bailouts the ‘New Normal’?

Are Bailouts the ‘New Normal’?

Hi friends. In this lesson, you will see what the word 'bailout' means, and you will also learn the expressions 'to dole out' and 'to turn on the fiscal taps'. Before I get underway, I do want to mention that I was traveling in Europe recently and spent a good deal of...

Share This