m
 
 



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2 moreign irect nvestment is any form of investment
that earns interest in enterprises which function outside
of the domestic territory of the investor.

2 m
s require a business relationship between a parent

company and its foreign subsidiary.

2
t usually involves participation in management, joint-

venture, transfer of technology and expertise.

2 moreign direct business relationships give rise to

multinational corporations.

m m

2  m -
t is also referred to as ´direct

investment abroadµ.
n this case it is the local capital,
which is being invested in some foreign resource.
2  m -
t is a typical form of what is termed as
'inward investment'. Here, investment of foreign capital
occurs in local resources.
 ! "#$%$##&m
2 ertical m

2 Horizontal m

  


2 Êo strengthen the existing market structure.

2 Êo explore the opportunities of new markets.

2 mor factors of production.

2 Êransfer of strategic assets.

2 Optimization of available opportunities.



 m
2
n spite of decline of trade barriers, m
has
grown more rapidly than world trade because
À Businesses fear protectionist pressures.

À m
is seen a way of avoiding trade barriers.

À ramatic political and economic changes in many

parts of the world.

À Globalization of the world economy has raised the

vision of firms who now see the entire world as
their market.
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2 6equired approval of the Government {Êhe moreign

nvestment Promotion Board (m
PB)}.

2 Government policies on m
also offer opportunities

for foreign investors to invest in different sectors.

2 Liberal policies.

2 Political relationship between parent and its foreign

country.
 (

2 Êo etermine the amount of foreign direct investment in
various sector.

2 Êo attract the MNCs.

2 Êo promote the investment opportunities.

2 Êo restrict m
in some areas. 6eal estate & housing,

gambling, lottery business, betting and chit funds for
example.

2 Êo observed even after the permission has been provided.

2 6eviewed on a regular basis.



m m '
  


2 Vdverse effects on competition.

2 Vdverse effects on the balance of payments

À Vfter the initial capital inflow there is normally a subsequent
outflow of earnings

À moreign subsidiaries could import a substantial number of

inputs

2 National sovereignty and autonomy

À |ome host governments worry that m
is accompanied by
some loss of economic independence resulting in the host
country·s economy being controlled by a foreign corporation
'