Trends and theory of foreign direct investment (FDI)
Foreign direct investment is also recognized as international direct investment, verities part of capital account of payment’s balance. Direct investment is described as an investment which includes deducts from or obtains a permanent interest in a project functioning in a financial system except that of the financier where the reason is to get an effective voice in administration of the enterprise.
Effective voice is calculated as ten percent in FDI statistics, of the company’s share capital; any savings below this is calculated as portfolio savings under the balance of payment statistics and not integrated FDI (Allen and Dar, 2012). It must be distinguished that FDI is economical thought and it is not similar as the expenditure of capital on fixed assets. Normally FDI statistics verified on the basis of net, meaning investments are included by companies. A range of investment firms are covered by FDI. For an example, a company of UK establishes a subsidiary or branch in foreign country, introducing start up capital. Often this is recognizing as green field investment (Moosa, 2002). Another example is of a company in UK that sells or purchases the equity of functioning foreign company. Often this is recognizing like M & A activity.
There are two major statistical foundation quoted for the flows of international FDI. Several data of flow was published by OECD. The flows of world FDI were published by UNCTAD annually by covering the earlier year in WIR (World Investment Report). This gives information on a greater group of nations and also contains the data and commentary. Both the sources support their figure on statistical sources of national level.
In 2010, FDI inflows of world increased by five percent to dollar 1.2 trillion from dollar 1.1 trillion in the year 2009 (Allen and Dar, 2012). Both the figures remained well shorter of the higher record of dollar 2.1 trillion in year 2007. In developing countries FDI flows increased by twelve percent in 2010, to five hundred and seventy four billion USD in next year. In 2010, total flow of developed countries fell by one percent to just over six hundred billion USD, being the sub region through Europe where both outflows and inflows fell very sharply.

HSBC - Inward investment trends
Levels of FDI broadly follow global and regional economic cycles so that there are periodic troughs of inward investment activity as well as peaks. But the timing and the extent of them can’t always be foreseen. In 2000, for instance, global FDI reached a record high only to tumble in 2001 with flows down more than 50% due to the economic slowdown in the US and other parts of the world.
In terms of overall FDI performance the UK still remains dominant in Europe and is second only to the US in having the greatest inflows and outflows of FDI. UNCTAD estimates that the UK had inflows of US$171 billion in 2007, an increase of nearly 23%. For the financial year ended March 2008 UK Trade & Investment reported continuing strong growth of inward investment with a total of 1,573 projects from 48 countries, a 10% increase. Forty-two per cent of projects were new investments; 28% were expansions; and 30% were M&As. A considerable number of these were in the high-value category now targeted by UKTI, and R&D was particularly strong. This once again emphasises the UK’s innovation credentials. The United States continues to be the main source of investment projects into the UK with 30% of the total. There were significant increases in projects from Germany and Japan, our second and thirdlargest investor countries. And projects from India and China continued to grow.
The UK focus is on sectors where it has clear competitive advantages: ICT, life sciences, financial and business services, creative industries, environmental technologies and advanced engineering. Trying to predict in terms of FDI which sectors will rise and fall over the next five years is not an exact science. But plainly the single most influential factor is the growth of economies and consumers in the developing world, with the effects of China and India’s explosive growth already being felt. We have already seen commodity prices soar – everything from iron ore and cement to rice and gold. At the same time the global demand for energy increases every year while pressure on supplies of carbon fuels continues.

As to the rising star nations of FDI in the next few years, China and India will continue to be both huge sources and recipients of FDI. And staying in Asia Pacific, Vietnam and Cambodia are already on the rise as recipients of outsourced operations from China. Indonesia is another emerging nation to watch. Canada and Mexico and the slowly waking giant of Brazil are flexing their FDI muscles, whilst the Gulf States, Turkey, and the transition economies in central Europe are interesting prospects as FDI players.
Finally, has the current FDI bubble burst? UNCTAD along with the OECD forecasts significant FDI falls in 2008. The US is experiencing economic difficulties deepened by the effects of the financial credit turmoil. We have already seen in late 2007 and the first half of 2008 the slowing of outward investment from the US and a significant fall in cross-border M&A activity. As a result FDI into Europe and particularly the UK could be severely affected. Even the inflationary wobble in China may blunt FDI inflows and outflows.
Yet as we know, when companies are experiencing pressures in their home market there is a greater incentive for them to look overseas for new opportunities and so there may be a degree of self-levelling. So while the short-term picture is less positive, the medium to longer-term picture is one where growing business enterprises and rising consumer demand across an even more globalised economy will continue to be drivers of strong and sustainable foreign direct investment.

Allen G. Dar A. (2012), Foreign Direct Investment (FDI), House of CommonsMoosa I. A. (2002), Foreign Direct Investment: Theory, Evidence, and Practice, Palgrave Macmillan
Reference  http://www.weeklytimesofindia.com/index.php/business-news/hsbc-upbeat-on-asia-as-profit-hits-22-billion/http://www.ft.com/cms/s/0/31ac6efa-5091-11df-bc86-00144feab49a.html#axzz1oVEAhLZxhttp://www.bbc.co.uk/news/business-17176332