Foreign Direct Investment(FDI)–an Indicator of Globalization

As we will see, globalization is a word (and phenomenon) that is analogous to a Rorschach test in that everyone seems to have his, or her, own slightly unique definition of what it actually means. There is wide agreement, however, that an important characteristic of contemporary globalization is the level of economic integration internationally. One such component of that integration is foreign direct investment (FDI). From the World Resources Institute, here is a map that shows the differing levels of FDI around the globe. The patterns should, by now, be exceedingly familiar.


Here is the map description:

Foreign direct investment data do not give a complete picture of international investment in an economy. Balance of payments data on foreign direct investment do not include capital raised locally, which has become an important source of financing for investment projects in some developing countries. In addition, foreign direct investment data capture only cross-border investment flows involving equity participation and thus omit nonequity cross-border transactions such as intrafirm flows of goods and services. For a detailed discussion of the data issues see the World Bank’s World Debt Tables 1993-1994 (volume 1, chapter 3). Also, cross-country comparisons may not be accurate, because of differences in the definition of what constitutes foreign direct investment.

Source: World Bank Group. 2004, World Development Indicators Online. Washington, DC:World Bank.
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