Short term Capital is most mobile Factor of Production. It is tfr by Co. or individuals because of difference in expected returns. STC is more faster to tfr, investors feel more certain about S.T political & eco conditions.
Reasons: Return on Capital, Govt. aid & loans, NGO’s donate funds, Remittance by individuals to family.
Mobility of people – tourist, students, retirees; Incur high cost of transportation; learn language; adjust to culture; For work (temp or permanent);
Governmental concern : Host country’s national interest may suffer if MNC makes decision on the basis of its global or national objectives.
Investor Concern : Control is important for foreign Co. because they want to do what is best for their global operations, rather that what is best for a specific country. Control in FDI lowers a Co.’s operating cost and increases its rate of technology transfer.
The major recipients of FDI are developed countries, but due to the economic slowdown the trend is slowly shifting to developing economies.
The interest in developed countries is for following 3 reasons: Investments are market seeking and dev eco ‘ve large markets; investors discouraged by political turmoil in emerging economies; OECD to liberalize direct investments among members.