Development effects greatest in new companies
IFU primarily invests in new enterprises, which provides the greatest development effects.
According to the UN, up to 80 per cent of global foreign direct investments (FDI) are linked to acquisitions of existing enterprises. This means that just 20 per cent of investments are in the establishment of new enterprises, so-called greenfield projects.
At IFU, the picture is practically the reverse. Just under 70 per cent of the new projects contracted by IFU in 2014 are in greenfield projects.
Effects greatest in new companies
The establishment of new companies is usually deemed to provide the greatest development effects as new business activity is introduced into the country of investment. However, it is also a type of investment considered particularly risky by investors. Venture capital from organisations such as IFU is therefore often a prerequisite for this type of investment in developing countries.
It should also be emphasised that acquisitions of existing companies also generally provides development benefits. Often, this type of investments result in significant upgrades in the form of transfers of technology and upgrading the employees' qualifications.