What is the definition of "foreign direct investment" (FDI)?

Foreign direct investment (FDI) is defined as an investment made by a company or an individual in one country into business interests in another country. This typically involves acquiring a substantial interest in a foreign business, usually characterized by ownership of at least 10% of the foreign company's equity.

This definition captures the essence of FDI, which not only includes the transfer of capital but also often involves the transfer of technology, management skills, and other resources that can help the host country develop economically. FDI can enable a firm to establish a foothold in the foreign market and is often seen as a long-term investment strategy, contrasting with portfolio investments, where investors seek short-term gains through the purchase of stocks and bonds.

The other options reflect different investment concepts. Investment made by a company in its domestic market refers to domestic investment rather than foreign investment. Investment made by a government in foreign markets could imply foreign aid or government-led initiatives but does not encapsulate the private sector's role in FDI. Lastly, a loan provided by international banks to developing countries describes financial aid or lending, which is unrelated to foreign direct investment as it does not involve equity stake or ownership in a business.