Foreign Trade

Both Foreign Direct Investment (FDI) and Foreign Institutional Investor (FII) are related to investment in a country. Which one of the following statements best represents an important difference between the two?

  1. FII helps bring better management skills and technology, while FDI only brings in capital
  2. FII helps in increasing capital availability in general, while FDI only targets specific sectors
  3. FII is considered to be more stable than FDI
  4. FDI flows only into the secondary market, while FII targets primary market

Answer

FDI is an investment that a parent company makes in a foreign country. On the contrary, FII is an investment made by an investor in the markets of a foreign nation.

The correct option is B.