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Econ Development

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PRIVATE CAPITAL FLOWS www.investopedia.com It is the movement of money for the purpose of investment, trade, or business transaction.
Capital flows occur within corporations in the form of investment capital and capital spending on operations and research & development.
On a larger scale, government direct capital flows from tax receipts into programs and operations, and through trade with other nations and currencies.
Individual investors direct savings and investment capital into securities like stocks, bonds, and mutual funds.

FOREIGN DIRECT INVESTMENT (FDI) www.investopedia.com/terms/f/fdi.asp An investment made by a company or entity based in one country, into a company or entity in another country.
FDI differ substantially from indirect investments such as portfolio flows, wherein overseas institutions invest in equities listed on a nation’s stock exchange.

The structure of private flows also changed notably, shifting from a predominanceof bank loans to foreign direct investment (FDI) and portfolio investment (see Table 13.1). The shareof foreign direct investment going to developing countries has increased to38 percent of global foreign direct investment, driven by rapid growth of transnational corporations and encouraged by liberalization of markets and better prospects for economic growth in a number of developing countries. However, following the East Asian financial crisis of 1997, net private capital flows to developing countries decreased to the level of the early 1990s (see Fig. 13.2) and the share of FDI to developing countries in global FDI fell to about 20 percent.

The distribution of FDI among developing countries remains extremely unequal. In the second half of the 1990s, more than half of FDI went to just 4 countries and over one-third to just 2 big countries—China and Brazil (see Fig. 13.3). At the end of the 1990s the share of

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