FaulFDI - By Michael Faul Ways To Invest in a Foreign...

Info iconThis preview shows pages 1–11. Sign up to view the full content.

View Full Document Right Arrow Icon
By Michael Faul
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Ways To Invest in a Foreign Market Ways To Invest in a Foreign Market Foreign Direct Investment - When a firm directly invests in production or other facilities in a foreign country, and maintains effective control of said investment Foreign Portfolio Investment – Investing in securities sold by a foreign firm or government
Background image of page 2
Advantages of Bringing in FDI Advantages of Bringing in FDI Technology Transfers Inflows of foreign stable capital into the country Helps in the transition to privatization (when state owned firms are sold to foreign investors) Improves the countries’ infrastructures Brings foreign executives into the country with sufficient knowledge of macroeconomic global and local situations
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
The Asian Crisis The Asian Crisis Causes : High levels of short-term dept vs. GDP led to a financial Panic Large inflows of Foreign Portfolio Investment led to huge amounts of short-term dept that was feared to never be repaid Investors began pulling out their funds from solvent but illiquid banks at the same time in 1997
Background image of page 4
Short-Term Debt and Reserves Short-Term Debt and Reserves http://www.imf.org/external/pubs/ft/wp/1999/wp99138.pdf http://www.imf.org/external/pubs/ft/wp/1999/wp99138.pdf
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Debt-to-GDP Ratio Debt-to-GDP Ratio http://www.imf.org/external/pubs/ft/wp/1999/wp99138.pdf http://www.imf.org/external/pubs/ft/wp/1999/wp99138.pdf
Background image of page 6
Financial Results of the Asian Crisis Financial Results of the Asian Crisis http://www.imf.org/external/pubs/ft/wp/1999/wp99138.pdf http://www.imf.org/external/pubs/ft/wp/1999/wp99138.pdf
Background image of page 7

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
FDI and Stable Capital FDI and Stable Capital The capital investments that are made through FDI are long-term investments that are illiquid assets, and thus speculation cannot cause a “mass pull-out” of this capital Had the investments in Asia been of the direct rather than portfolio nature, the crisis may have been avoided
Background image of page 8
Factors Influencing FDI Inflows Factors Influencing FDI Inflows http://www.univ-lille1.fr/afsemedee/communications/toubal_farid.pdf
Background image of page 9

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Traditional Variables in Traditional Variables in Determining Whether to Invest Determining Whether to Invest FDI in an Economy: FDI in an Economy: Plant/Firm Level Efficiency: Are labor costs low in this country Is there enough skilled labor in this country, so that there exists a relatively low productivity-adjusted labor cost Are there government policies, such as low corporate tax rates that could reduce production costs Transportation Costs: Is there an existing infrastructure that will allow for the flow of both the inputs/outputs of a given investment Are there local suppliers in this economy, or is it necessary to look abroad for necessary inputs Are there tariffs or import/export quotas that prevent a multinational firm from maximizing the effectiveness of its foreign investment
Background image of page 10
Image of page 11
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 32

FaulFDI - By Michael Faul Ways To Invest in a Foreign...

This preview shows document pages 1 - 11. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online