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Foreign direct investment History Foreign direct investment (FDI) is a measure of foreign ownership of productive assets, such as factories, mines and land. Increasing foreign investment can be used as one measure of growing economic globalization. Maps below show net inflows of foreign direct investment as a percentage of gross domestic product (GDP). The largest flows of foreign investment occur between the industrialized countries (North America, Western Europe and Japan). But flows to non-industrialized countries are increasing sharply. US International Direct Investment Flows: Period FDI Outflow FDI Inflows Net 1960-69 $ 42.18 bn $ 5.13 bn + $ 37.04 bn 1970-79 $ 122.72 bn $ 40.79 bn + $ 81.93 bn 1980-89 $ 206.27 bn $ 329.23 bn - $ 122.96 bn 1990-99 $ 950.47 bn $ 907.34 bn + $ 43.13 bn 2000-07 $ 1,629.05 bn $ 1,421.31 bn + $ 207.74 bn Total $ 2,950.69 bn $ 2,703.81 bn + $ 246.88 bn  Type of Foreign Direct Investors A foreign direct investor may be classified in any sector of the economy and could be any one of the following:
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an individual; a group of related individuals; an incorporated or unincorporated entity; a public company or private company; a group of related enterprises; a government body; an estate (law), trust or other societal organisation; or any combination of the above.
 Methods of Foreign Direct Investments The foreign direct investor may acquire 10% or more of the voting power of an enterprise in an economy through any of the following methods:
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by incorporating a wholly owned subsidiary or company by acquiring shares in an associated enterprise through a merger or an acquisition of an unrelated enterprise participating in an equity joint venture with another investor or enterprise
Foreign direct investment incentives may take the following forms:[citation
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low corporate tax and income tax rates tax holidays other types of tax concessions preferential tariffs special economic zones investment financial subsidies soft loan or loan guarantees free land or land subsidies relocation & expatriation subsidies job training & employment subsidies infrastructure subsidies R&D support derogation from regulations (usually for very large projects)
Debates about the benefits of FDI for low-income countries Some countries have put restrictions on FDI in certain sectors. India, with its restriction on FDI in the retail sector is a good example.In a country like India, the “walmartization” of the country could have significant negative effects on the overall economy by reducing the number of people employed in the retail sector (currently the second largest employment sector
nationally) and depressing the income of people involved in the agriculture sector (currently the largest employment sector nationally).
Net international investment position The difference between a country's external financial assets and liabilities is the net international investment position (NIIP). A country's international investment position (IIP) is a financial statement setting out the value and composition of that country's external financial assets and liabilities.
International Investment Position = domestically owned foreign assets - foreign owned domestic assets
U.S.A. net international investment position
International Centre for Settlement of Investment Disputes The International Centre for Settlement of Investment Disputes (ICSID), an institution of the World Bank group based in Washington, D.C., was established in 1966 pursuant to the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (the ICSID Convention or Washington Convention). As of May 2005, 155 countries had signed the ICSID Convention. ICSID has an Administrative Council, chaired by the World Bank's President, and a Secretariat. It provides facilities for the conciliation and
arbitration of investment disputes between member countries and individual investors. During the first decade of the twenty-first century, with the proliferation of bilateral investment treaties (BITs), most of which refer present and future investment disputes to the ICSID, the caseload of the ICSID substantially increased. As of March 30, 2007, ICSID had registered 263 cases more than 30 of which were pending against Argentina– Argentina's economic crisis in the late 1990s and subsequent Argentine government measures led several foreign investors to file cases against Argentina. Bolivia, Nicaragua, Ecuador, and Venezuela have announced their intention to withdraw from the ICSID . Establishment On a number of occasions in the past, the World Bank as an institution and the President of the Bank in his personal capacity have assisted in mediation or conciliation of investment disputes between governments and private foreign investors. The creation of the International Centre for Settlement of Investment Disputes (ICSID) in 1966 was in part intended to relieve the President and the staff of the burden of becoming involved in such disputes. But the Bank's overriding consideration in creating ICSID was the belief that
an institution specially designed to facilitate the settlement of investment disputes between governments and foreign investors could help to promote increased flows of international investment. ICSID was established under the Convention on the Settlement of Investment Disputes between States and Nationals of Other States which came into force on October 14, 1966. ICSID has an Administrative Council and a Secretariat. The Administrative Council is chaired by the World Bank's President and consists of one representative of each State which has ratified the Convention. Annual meetings of the Council are held in conjunction with the joint Bank/Fund annual meetings. ICSID is an autonomous international organization. However, it has close links with the World Bank. All of ICSID's members are also members of the Bank. Unless a government makes a contrary designation, its Governor for the Bank sits ex officio on ICSID's Administrative Council. The expenses of the ICSID Secretariat are financed out of the Bank's budget, although the costs of individual proceedings are borne by the parties involved.
 Activities Pursuant to the Convention, ICSID provides facilities for the conciliation and arbitration of disputes between member countries and investors who qualify as nationals of other member countries. Recourse to ICSID conciliation and arbitration is entirely voluntary. However, once the parties have consented to arbitration under the ICSID Convention, neither can unilaterally withdraw its consent. Moreover, all ICSID Contracting States, whether or not parties to the dispute, are required by the Convention to recognize and enforce ICSID arbitral awards. Besides this original role, the Centre has since 1978 had a set of Additional Facility Rules authorizing the ICSID Secretariat to administer certain types of proceedings between States and foreign nationals which fall outside the scope of the Convention. These include conciliation and arbitration proceedings where either the State party or the home State of the foreign national is not a member of ICSID. Additional Facility conciliation and arbitration are also available for cases where the dispute is not an investment dispute provided it relates to a transaction which has "features that distinguishes it from an ordinary commercial transaction." The Additional Facility Rules further allow ICSID to administer a type of proceedings not
provided for in the Convention, namely fact-finding proceedings to which any State and foreign national may have recourse if they wish to institute an inquiry "to examine and report on facts." A third activity of ICSID in the field of the settlement of disputes has consisted in the Secretary-General of ICSID accepting to act as the appointing authority of arbitrators for ad hoc (i.e., non-institutional) arbitration proceedings. This is most commonly done in the context of arrangements for arbitration under the Arbitration Rules of the United Nations Commission on International Trade Law (UNCITRAL), which are specially designed for ad hoc proceedings. Provisions on ICSID arbitration are commonly found in investment contracts between governments of member countries and investors from other member countries. Advance consents by governments to submit investment disputes to ICSID arbitration can also be found in about twenty investment laws and in over 900 bilateral investment treaties. Arbitration under the auspices of ICSID is similarly one of the main mechanisms for the settlement of investment disputes under four recent multilateral trade and investment treaties (the North American Free Trade Agreement, the Energy
Charter Treaty, the Cartagena Free Trade Agreement and the Colonia Investment Protocol of Mercosur). In addition to these activities, ICSID also carries on advisory and research activities, publishing Investment Laws of the World and of Investment Treaties, and collaborates with other World Bank Group units. Since April 1986, the Centre has published a semi-annual law journal entitled ICSID Review-Foreign Investment Law Journal. ICSID proceedings do not necessarily take place in Washington, D.C. Other possible locations include the Permanent Court of Arbitration at The Hague, the Regional Arbitration Centres of the Asian-African Legal Consultative Committee at Cairo and Kuala Lumpur, the Australian Centre for International Commercial Arbitration at Melbourne, the Australian Commercial Disputes Centre at Sydney, the Singapore International Arbitration Centre, the GCC Commercial Arbitration Centre at Bahrain and the Frankfurt International Arbitration Center of German Institution of Arbitration (DIS) and the Frankfurt Chamber of Commerce and Industry.
Foreign Direct Investment
Foreign Direct Investment (FDI) is normally defined as a form of investment made in order to gain unwavering and long-lasting interest in enterprises that are operated outside of the economy of the shareholder/ depositor. In FDI, there is a parent enterprise and a foreign associate, which unites to form a Multinational Corporation (MNC). In order to be deemed as a FDI, the investment must give the parent enterprise power and control over its foreign affiliate.
In India, Foreign Direct Investment Policy allows for investment only in case of the following form of investments:
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Through financial alliance Through joint schemes and technical alliance Through capital markets, via Euro issues Through private placements or preferential allotments
Foreign Direct Investment in India is not allowed under the following industrial sectors:
Arms and ammunition Atomic Energy
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Coal and lignite Rail Transport Mining of metals like iron, manganese, chrome, gypsum, sulfur, gold, diamonds, copper, zinc
FDI In India Across Different Sector Hotel & Tourism Hotels include restaurants, beach resorts and business ventures providing accommodation and food facilities to tourist. Tourism would include travel agencies, tour operators, transport facilities, leisure, entertainment, amusement, sports and health units. 100 per cent FDI is permitted for this sector through the automatic route.
Trading For trading companies 100 per cent FDI is allowed for
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Exports Bulk Imports Cash and Carry wholesale trading.
Power For business activities in power sector like electricity generation,
transmission and distribution other than atomic plants the FDI allowed is up to 100 per cent Drugs & Pharmaceuticals For the production of drugs and pharmaceutical a FDI of 100 per cent is allowed, subject to the fact that the venture does not attract compulsory licensing, does not involve use of recombinant DNA technology.
Private Banking FDI of 49 per cent is allowed in the Banking sector through the automatic route provided the investment adheres to guidelines issued by RBI.
For the Insurance sector FDI allowed is 26 per cent through the automatic route on condition of getting license from Insurance Regulatory and Development Authority (IRDA). Telecommunication
For basic, cellular, value added services and mobile personal communications by satellite, FDI is 49 per cent.
For ISPs with gateways, radio-paging and end to end bandwidth, FDI is allowed up to 74 per cent. But any FDI above 49 per cent would require government approval.
FDI of 100 per cent is permitted provided such investments satisfy certain prerequisites.
They can have direct investment in industry, trade and infrastructure
Up to 100 per cent equity is allowed in the following sectors
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34 High Priority Industry Groups Export Trading Companies Hotels and Tourism-related Projects Hospitals, Diagnostic Centers Shipping Deep Sea Fishing Oil Exploration Power
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Housing and Real Estate Development Highways, Bridges and Ports Sick Industrial Units Industries Requiring Compulsory Licensing Industries Reserved for Small Scale Sector
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