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Distinguish Between Foreign Aid and Foreign Investment

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Foreign Aid

Foreign Aid is the assistance (in the form of resources or commodities such as foreign currency, equipment, technical skills, food, relief items etc.) mostly given by rich countries (Britain, the USA, Germany, Japan etc.) or international organizations and financial institutions (the World Bank, the I.M.F., Peace Corps, specialized agencies of the UN etc.) to  needy or poor countries in the less developed parts of the world.

Foreign Investment

Foreign investment, on the other hand, refers to the inflow of foreign capital into an economy. This is usually for purely profit-making business purposes.

Foreign investment may be in the form of loans to the government of a country.

It could also  be in the form of equity capital (i.e. foreigners buying shares in local businesses) or in the form of direct private investment. In this last case, foreigners bring in their capital to establish businesses which they manage themselves.

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