Point out special features of Foreign Direct investments (FDI).

Foreign Direct Investments (FDI) is a form of private foreign investment. It is an investment in form of wholly owned subsidiary, joint business ventures or acquisitions. Some of the important characteristics of Foreign Direct Investments (FDI) are as follows:

The prime motive behind FDI is profit. Profit can be in form of royalty (in case of intellectual property) or in form of dividend payout.

FDI is a capital investment made by a foreign company in ‘home country’.

On decease of firm, the invested foreign capital and assets in the holding company can be repatriated to source country or country of origin.

FDI investors control management and investments in different ways such as management contracts and memorandums, turnkey arrangements, product pricing, franchising & contracting, licensing, patents, trade marks and controlling other intellectual property, product sharing and subcontracting.

Foreign investors can enter home country by making investments in different ways, such as opening branches, setting up subsidiary (wholly owned or joint venture), foreign controlled company or acquire stake in exiting businesses.

FDI is harmful if the economy is highly protected and foreign investments are made behind high tariffs.