1. The concept of direct investment (FDI)

FDI direct investment is the process by which an organization or individual invests in a business or other business in a country other than their own. This can include buying shares in an operating company, investing in the construction of new infrastructure, or even buy a company that is operating in a certain industry. 

The purpose of FDI is usually to take advantage of business opportunities and growth in a foreign market. FDI implementation can benefit both investors and recipient countries, including the creation of new jobs, economic growth, and improved quality of life.

2. Indirect Investment Concept (FPI)

FPI indirect investment is a type of investment in which an investor buys investments not directly in a business or asset, but through the purchase of securities, investment funds, or other financial instruments of a certain country or region. 

This means that FPI investors do not directly own the assets or businesses they invest in, but instead own indirect investments. These indirect investments can include securities such as stocks, bonds, fund certificates, monetary documents, and other financial instruments.

3. Similar characteristics of direct investment and indirect investment

– Both are types of foreign investment.

– Direct investment and indirect investment abroad both come from the international integration of countries,

– Both forms of direct investment and indirect investment aim to earn profits for investors. That profit is directly proportional to the business results of the investee and the amount of capital spent by the investor. Therefore, what investors are most concerned about with both forms of investment is the business situation of the investment recipient.

– Both direct and indirect investment are subject to the impact of national and international laws. For each different economy, countries will have specific laws on foreign investment to suit the characteristics of the domestic economy. In addition, the international community also has certain laws to ensure the fairness of the interests of both parties in transactions.

4. The difference between direct investment and indirect investment

	FDI	FPI
In essence	Foreign direct investment means that the foreign investor invests investment capital and has autonomy in directly holding the right to manage, control and use that capital in the process of business investment. Direct investment creates a shift in both capital, technology and human resources, so this form often tends to invest from developed countries to developing countries.	Foreign indirect investment means that foreign investors invest capital but all other activities will be undertaken through a third party such as managing and supervising decisions related to that investment capital… In addition, the profit received by the foreign investor will be divided among the third party that performs this work. Foreign indirect investment is a shift in capital, so it will usually be investment between developed countries or investment in businesses with high profitability.
Control	Investors actively control capital sources. They mean all the decisions they make and bear the losses and profits themselves.	The investor only puts capital, but the third party who receives that capital will take control.
Investment Vehicles	Investors are required to provide a certain amount of capital within the regulations (at least how much and how much at most) depending on the laws of each country.	Each country will have its own level of limit on the amount of securities, usually less than 10%.
About risks and returns	The form of foreign direct investment has risks depending on the proportion of investment capital. Foreign investors will have to bear the risk depending on the amount of capital invested in the business. Regarding the profits earned, investors will enjoy and divide according to the proportion of their investment capital.	In the form of foreign indirect investment, foreign investors will bear less risk because the investment recipient will bear the risk. The profits earned will be divided according to dividends or the sale of securities to collect the difference.
Purpose	Profit generation is key, plus control.	The purpose is just profit.
Investment Procedures	Investors need to have legal documents before investing, including: ·      Investment Registration Certificate ·      Establishment of the Economic Certification Team	When contributing capital, investors need to complete the procedures for changing shareholders corresponding to the type of business they are operating.
Forms of expression	Along with capital, investors also need to participate in business activities, transfer technology as well as human resources to the subject receiving the investment.	Simply transferring the investment capital abroad for investment.
Circulation trends	Transfer from developed countries to developing countries.	Countries have the same level of development.

Above is the content of KALF’s advice on Direct Investment and Indirect Investment. All of our above advice is based on applicable legal regulations. If you have any questions or requests about legal issues, please contact us for timely answers.

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