WHAT IS THE SIGNIFICANCE OF FOREIGN

INVESTMENT?
 Next to commodity imports and exports, no other aspect
of foreign trade exerts a significant impact upon a nation’s
economy, particularly in those countries belonging to the
underdeveloped category, than foreign investments.
TWO IMPORTANT REASON:
 The recognition
concerning the role of
foreign investment in
promoting trade relations
among countries.

 Foreign investment offer a

palliative remedy to the
perplexing problem of
dollar shortage and the
introduction of modern
technology in the recipient
countries.

WHAT ARE THE TWO FORMS OF FOREIGN INVESTMENT?

 DIRECT INVESTMENT
 PORTFOLIO INVESTMENT /
INDIRECT INVESTMENT
Direct investments of a country in another represent the
venture capital of the former which is employed in the
exploitation of foreign mineral and agricultural resources; in the
establishments of different kinds of business enterprise abroad,
i.e., manufacturing, trade, etc., and in the operation of public
utilities in a foreign country.

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Portfolio or indirect investments, consist of foreign stocks and
bonds purchased by individuals investors, insurance companies,
investment trust, financial institutions and others. Portfolio type of
investment carry no commercial control whatsoever of the foreign
enterprise and are intended for income only. A good example of
portfolio investment is that of loans obtained from abroad.

WHAT ARE THE PRINCIPLES GOVERNING INVESTMENT?

 When privately-owned capital is invested abroad, it is
expected to serve a dual purpose. The country which is
the recipient of such investment looks forward to
future benefits for some or all of its people, both social
and economic.

 The private investor who furnishes the funds that are

used abroad, in developing an industrial
establishment looks forward to receipt of greater
income. Thus, while the investor is able to render
service to the recipient country in the form of benefits
mentioned above, however, he is primarily motivated
by the desire for increased profits.

WHAT ARE THE FUNDAMENTAL PRINCIPLES?

 The business enterprise to be established should fill in
a particular need and, at the same time, the business
should be able to offer bright prospects of regards in
the form of dividends or profits.

 To achieve the primordial objective of the capitalist,

the management of the enterprise should be in the
hands of competent and honest men.

WHAT ARE THE FACTORS THAT INFLUENCED

INVESTMENTS?
 TAX CONCESSIONS
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