LGST 219 - Class 20 Notes

LGST 219 - Class 20 Notes - CLASS 20 (Nov 21): Foreign...

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CLASS 20 (Nov 21): Foreign Direct Investment FDI 1] The distinction between investment and trade is that trade is buying and selling goods. Once it's sold you don't retain control. Investment on the other hand assumes control afterwards. 2] FDI is a very volatile area and changes with political situation . Back then there was a lot of restrictions but now everyone is open to FDI. 3] The U.S. has been traditionally very open to FDI but now with concerns about national security and increasing xenophobia, there have been restrictions. FDI in the U.S. is plummeting. 4] Why do countries want foreign direct investment? a. FDI brings employment . 5] We don't have an international standard for FDI. We have lots of national standards and the European Union has a regional standard. 6] Countries put up screening requirements to decide which investments are desirable and can come in and which cannot be allowed in. 7] If you're investing in a country, make sure you check the tax law, repatriation law, etc, etc. 8] Lots of other things affect foreign direct investment. a. Corruption - One of these is corruption. It is very tough and maybe impossible to make a profit when corruption is present. One example is Georgia. b. Insider Secrets - Japan has insider secrets about how you operate in Japan that are very exclusive and only known to Japanese businessmen. These are unwritten rules of the culture designed to keep foreign competition out. FDI is not surprisingly low in Japan. c. Unpredictability - Economic crisis in South Africa. Malema says that we have to nationalize all of our mining industry. Government should oust all private owners of mines. 9] When we're considering investments, don’t just stop at the legal situation; we also look at what's going on in the country. Only then can we make a sound decision about whether or not we want to invest in that particular country. 10] European Union a. They want: (a.i) A system that will foster European integration. (a.ii) We want transborder investment in the EU for investment to be very easy. (a.iii) Make the EU function like one country, like the U.S.
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a. They want freedom of establishment of companies within the EU. People and companies should be able to move freely. We're all Europeans no matter where you are incorporated or established.
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This note was uploaded on 01/11/2012 for the course LGST 219 taught by Professor Anne.mayer during the Fall '11 term at UPenn.

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LGST 219 - Class 20 Notes - CLASS 20 (Nov 21): Foreign...

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