Indirect FDI

The Journal of World Investment & Trade, Volume 13, Number 4, 2012 , pp. 542-555

Posted: 10 Sep 2012

See all articles by Kalman Kalotay

Kalman Kalotay

United Nations Conference on Trade and Development (UNCTAD); UNCTAD

Date Written: 2012

Abstract

This article analyses indirect FDI, denoting investment projects, in which the ultimate owner is different from the immediate investor. Reasons for the existence of this type of investment projects can be mostly corporate strategies and tax considerations. The development impact of indirect FDI is not necessarily negative; however it varies by the key types of indirect FDI (delegation of power to regional headquarters, nearshoring, concealed investment, and round tripping). It also depends on how the project money is transhipped: through an affiliate abroad, or through a special purpose entity. Government polices may influence largely the extent and development impact of indirect FDI, especially through tax policies. The phenomenon deserves more attention in the future, as currently indirect FDI is an under-researched topic.

Keywords: indirect FDI, transhipped FDI, round tripping, special purpose entities, ultimate owner, taxation

JEL Classification: F23, H25, K33

Suggested Citation

Kalotay, Kalman, Indirect FDI (2012). The Journal of World Investment & Trade, Volume 13, Number 4, 2012 , pp. 542-555. Available at SSRN: https://ssrn.com/abstract=2144411

Kalman Kalotay (Contact Author)

United Nations Conference on Trade and Development (UNCTAD) ( email )

Division on Investment, Technology and Enterprise
Palais des Nations
Geneva, 1211
Switzerland

UNCTAD ( email )

Division on Investment, Technology and Enterprise
Palais des Nations
Geneva, 1211
Switzerland

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