Foreign Investment

Foreign investment is investment by citizens and government of a country in industries of

other countries. Investment by foreigners within the country is also termed foreign
investment. Foreign direct investment (fdi) is investing in productive assets of another
country. The assets include domestic structures, organizations or equipments but do not
include stocks. Stocks are a high-risk option which does not include foreign direct
investments.

Advantages Of Foreign Investment

The investment encourages the job market in both countries.

There is sharing of technology.

The national companies have an opportunity to expand their operations globally.

The standards of the economies improve from a wider prospect.

Average supply will shift to other countries.

There is aggregate demand from the other country.

The country with high foreign direct investment is highly recognized at

international summits.

Disadvantages Of Foreign Investment

There is a chance of rise in inflation.

The country or industry that attracts foreign investment may become entirely
dependant for growth and increase the risk.

If the domestic companies are not competitive and efficient, they may suffer
losses.

Foreign Direct Investment

Foreign direct investment refers to acquiring a long-term interest in the company that is
outside the economy of the investor. The investor brings additional wealth to the
developing countries. Foreign direct investment, small business growth and exports
develop the economy rapidly. Foreign direct investments can increase national savings,
foreign exchange and tax revenue. Foreign direct investments bridge the skills and
technology gap, if any. Recession and credit crunch have affected the foreign direct
investment (UK) in real estate, hardware, energy, electronic components and chemicals.
It will recover by 2013.

Normally, technological collaborations, financial collaborations, Euro Issues in capital

markets and joint ventures are ways of making a foreign direct investment. The investor
can be an individual person, an enterprise, or a multi corporation.

There are International Promoting Agencies (IPAs) worldwide who aid in international
trade. They advise and process making a foreign direct investment. They can save time,
energy and guide you efficiently through the entire process by their knowledge, expertise
and network.

Foreign direct investment could be establishment of a new company or merging with an

existing firm in a foreign country. Horizontal foreign direct investment is investing in the
same industry overseas. Vertical foreign direct investment is investing in a process that
will aid the domestic production.

Advantages Of Foreign Direct Investment

There is a huge inflow in capital, technology and openings in employment. The

economy benefits with exchange of supply and demand in an international
market.

Foreign direct investment increases the employment in the trading countries

which is a significant benefit.

Imports and exports increase in both the trading countries. The quality of the
product increases with a free flow of international trade. There is widespread
technological advancement. There is a spill over effect of technology and quality
in the existing economies.

Focus on research and development increase

The profits gained by foreign direct investment increases re-investment

opportunities in the developing economy.

Low transportation costs

Avoiding trade restriction to expand into foreign markets

Tax benefits

Disadvantages of Foreign Direct Investment

Domestic companies not equipped to survive competition will not survive. The
foreign investor will be profit-oriented and may risk the entire joint venture. There
are rules and regulations developed by each economy to protect the interests of
national shareholders and enterprises.

Foreign direct investment is an expensive and risky option for companies. They
face expropriation, political risk and currency inconvertibility.

Rules and regulations In Foreign Direct Investment.

The policies developed by the UK government protect and facilitate international trade.
The national economy depends on the open market in a global way. There is a need for a
stable environment for trading and an impartial means of settling trade disputes that
arise. Therefore, the focus is on facilitating international trade and protecting the interest
of all the countries involved. The market must be open and fair for all to trade.

Transparency: Investors must clearly understand the local policies and the
relevant regulations before making a foreign direct investment.
 There should be equitable and fair treatment in the event of a dispute or transfer
of funds.

Facilitate the scope of business activities.

The investor must adhere to health, labour and environment regulations of the
developing economy. This will balance the major ethical issues in an international
trade.

Foreign direct investment markets in UK track details regarding capital investment, jobs,
locations, industry breakdown and motives of the investors. They also maintain a detailed
profile on each project and investor.

Factors Attracting Foreign Direct Investment In UK

Reduction in trade barriers

Growth of transnational companies and multicorporations

Development of Global triads like Southeast Asia, China, Europe and North
America

Liberalisation of markets

Decrease in domestic markets

World-wide privatisation

Cost saving opportunities

Technology

Wage differentials

Labour availability

Government aid and regional taxation levels

Industrial development

Initially, the southeast UK was the major attraction for foreign investors, but now there is
a more even distribution. Investors are also favouring Scotland, Wales, North England
and West Midlands.