The document discusses foreign direct investment (FDI) in three contexts: 1) It defines FDI and provides examples of American and Canadian companies investing abroad. 2) It then discusses FDI in China in the context of China's socialist economy, noting the pros of FDI bringing capital and technology which helped raise China's GDP, and the cons which include effects on local economies and profit repatriation. 3) It also discusses FDI in South Africa in the context of that country's capitalist economy, highlighting South Africa's natural resources and its goal of attracting more investment, as well as the potential pros and cons of nationalizing South Africa's mining industry.

1. Foreign Direct Investment

2. ITM Malad SMBA-18
Group No. 04 - Members
 Malvika Mudagal
 Rajiv Nair
 Payal Bhilkar
 Sweta Vibhakar
 Jay Sanghrajka
 Shradhha Kadam Shah

3. Foreign Direct Investment
Foreign direct investment (FDI): a firm
invests directly in foreign facilities.
A firm that engages in FDI becomes a
Multi-National Enterprise (MNE).
Involves ownership of entity abroad for:
Production
Marketing/service
R&D
Access of raw materials or other resource.

4. Foreign Direct Investment
 Number of ways - either by setting up a
subsidiary or associate company in the foreign
country, by acquiring shares of an overseas
company, or through a merger or joint venture.
 An example of foreign direct investment would
be an American company taking a majority stake
in a company in China.
 Another example would be a Canadian company
setting up a joint venture to develop a mineral
deposit in Chile.

5. SOCIALIST ECONOMY
FDI
CHINA

6. SOCIALIST ECONOMY
 Socialism is an Economic System where the means

of production, such as money and other forms of
capital, are owned by the state or public. Under a
socialist system, everyone works for wealth that is, in
turn, distributed to everyone.
 The government decides how wealth is distributed
among the people.
 Socialism can actually lower the living standards of
all by not rewarding work and by making public
assistance available to more than the neediest.

7. FDI – CHINA - PROS
 Largest population base in China (1.3 billion)
 Per capita GDP rose from about $300 in 1980
to $2500 in 2011
 China has grown rapidly over the last 35 years
from a very low income level.
 FDI brought in the Capital and Technology
 Output = ( Capital, Labor)

8. FDI – CHINA - PROS
 Tax revenue gap: raising funds for public
spending
 Management gap: improving entrepreneurship
 FDI inflows to China Increased in 2012,
approx. US$ 117.0 Billion
 Foreign-exchange gap: improving the BOP

9. FDI – CHINA – CONS
 Effects on local economies
 Restrictions on transfers of foreign partner's equity
stake
 No readily available local knowledge and
connections by Chinese partner
 Cannot be utilized in certain industries where
foreign ownership is limited (e.g., telecommunications)
 Has no "legal person" status in China and cannot
enter into contracts

10. FDI – CHINA - CONS
 Don’t reinvest their profit
 Create income for semi-skilled labor with low saving
propensities
 Return profits to their headquarters through
transfer pricing
 Restriction on Imports and Currency

11. CAPITALIST ECONOMY
FDI
SOUTH AFRICA

12. CAPITALIST ECONOMY
 Capitalism is the social system which now exists in
all countries of the world.
 Under this system, the means for producing and
distributing goods (the land, factories, technology,
transport system etc) are owned by a small minority of
people. We refer to this group of people as the
capitalist class.
South Africa: Middle income, emerging market with
abundance of natural resources

13. CAPITALIST ECONOMY
 World's largest producer of platinum, gold,
chromium
 Employment by sector: Agriculture 30%, Industry
25%, Services 45%.
 Presently, South Africa is pro-actively seeking
foreign investment as a key part of its economic policy
 Offers an attractive climate for foreign investment.
 U.S. is now the largest source of new investment in
South Africa

14. FDI – SOUTH AFRICA
What makes South Africa an attractive climate
for foreign investors?
 Substantial market with significant growth potential
 Economy moving towards market orientation
 Access to other markets in Africa
 Well developed financial institutions and capital markets
 Excellent communication and transport links
 Lower labour costs compared to industrialized countries
 Inexpensive electrical power and raw materials
 Strong macroeconomic policies.

15. FDI – SOUTHAFRICA - PROS
 Nationalization doesn't have to cut out the private
sector completely.
 Partnerships in Namibia and Bots wanna between
mining companies and the government have seen little
decrease in foreign investments.
 The private sector handles the funding and
operations of the mining industry, while the
government regulates manufacturing while remaining
in control of the mineral resources.
 Appealing for leading to a diversification of foreign
investments and assets

16. FDI – SOUTHAFRICA - PROS
 Nationalizing the mines could, in the short term, make it
better off on the whole. If ownership of the mines is turned over
to the state, future profits and current could be used towards
creating news jobs, and providing more state services for the
betterment of the South African people.
 Ownership of the mining industry turned over to the public
sector, investors and private sector previously involved in mining
able to focus other industries. And would make them more
wealthy and competitive on a domestic and global level.

17. FDI – SOUTHAFRICA - CONS
 Nationalizing the mines could significantly decrease foreign
investment at risk with government ownership of the industry.
 It could make South Africa less competitive on the global
stage.
 Nonexistent, insufficient, or slow compensation to former
investors could deter them from investing
 Creates a logistics issue. If outside firms were involved with
the transportation or creation of infrastructure

18. MIXED ECONOMY
FDI
INDIA

19. MIXED ECONOMY
 Mixed economy is an economic system in which both

the state and private sector direct the economy,
reflecting characteristics of both market economies
and planned economies.
 It is the combination of Capitalist and Socialist
economy.
 India had adopted a mixed economy after
independence with the intention of procuring the
advantages of both and avoiding their disadvantages.

20. MIXED ECONOMY
 Need of a developing economy like India in the

initial stages.
 But as the economy develops the private sector rise
into prominence and the mixed economy is knowingly
or unknowingly transformed in to a market regulated
economy.

21. FDI – INDIA - PROS
 Growth in Economy

 Job Opportunities
 Benefits to Farmers & Consumers
 Help to introduce new technologies in agri
marketing & other Developing Sectors
 The sectors that attracted higher inflows were
services, telecommunication, construction activities
and computer software and hardware

22. FDI – INDIA - PROS
 FDI in India in 2010 was $44.8 billion and in 2011

experienced an increase of 13% to $50.8 billion.
 In Retail Sector consumers will get lots of varieties
in a reasonable price
 Recent Updates
 Govt. of India allowed FDI in aviation 49%.
 Broadcast Sector up to 74%
 Multi-Brand Retail up to 51%
 Single-Brand retail up to 100%

23. FDI – INDIA - CONS
 Lack of Infrastructure Facilities

 Political Setback
 No Proper support of Government
 Needs to upgrade its labuor laws
 International reports on transparency rank India as
one of the most corrupt country every year
 Many of the small business owners and workers
from other functional areas may lose their jobs, as lot
of people are into unorganized retail business such as
small shop.

24. FDI – INDIA - CONS
 According to the non-government cult, FDI will

drain out the country’s share of revenue to foreign
countries which may cause negative impact on India’s
overall economy.
 Threats on organized and unorganized retail
players.

25.  American multinational retailer that runs
chains of large discount department stores and
warehouse stores.
 The world's third largest public corporation.
 The biggest private employer with over two
million employees and The largest retailer in
the world.
 The company was founded by Sam Walton in
1962, incorporated on October 31, 1969

26. WALMART – CHINA - SUPERCENTER
 Walmart entered the Chinese market and opened its
first Supercenter and Sam’s Club in Shenzhen in 1996
 Currently, Walmart operates a number of formats and
banners in China including Supercenters, Sam’s Clubs,
and Neighborhood Markets.
 As of March 1, 2012, Walmart had owned 370 units in
140 cities in 21 provinces and four municipalities, and
had created over 106, 500 job opportunities across
China.
 Walmart is committed to local talent development and
diversity, especially the cultivation and full utilization
of female staff and executives. 99.9% of Walmart China
associates are Chinese nationals

27. WALMART - CHINA
 Grossed only $916 million in China, less than 2% of
Wal-Mart’s international sales and a tiny sliver of its
$288 billion revenue
 Wal-Mart spent $18 billion on merchandise from China
based suppliers, accounting for 3% of China’s total
exports
 Wal-Mart China’s 6th largest export market
 WEAKNESS
 Regional Associations: limitations
 Political Uncertainity: Vulnerability
 Local Presence
 Brand Visibility in other regions?

28. WALMART – INDIA - BHARTI
 Wal-Mart Stores Inc prepared its entry into India's
supermarket sector in 2010 with a $100 million
investment into a consultancy with no employees, no
profits and a scant $14,000 in revenue.
 Promise of a middle class that will one day rival
China's
 But local opposition has been fierce because of
concern that Wal-Mart and its peers will knock
millions of mom-and-pop stores out of business.

29. "Best Price Modern Wholesale"
 Bharti Walmart Pvt Ltd first outlet in Amritsar was
inaugurated in May – 2009 "Best Price Modern
Wholesale".
 Operates 7 Wholesale Stores in India
 It for wholesale cash-and-carry and back-end
supply chain management operations in India to
serve small retailers, manufacturers and farmers.
 The two companies, have signed in August 2007

30. Recommendations
 Compare the Pro and the
Cons
 Develop str ategies that
targe ts the right kind of FDI
 Consider the long term
effects to the entire
economy and the social w ell
 Use of Environmental
friendly technology

31. Recommendations
 To keep pace with growing
GDP government should
encour age foreign
investments.
 On the basis of above
research and discussion FDI
has both positive and
negative impact on Econom y.
 In a nutshell, FDI should be
encour aged with s trict
feasible and mutually

33. REFERENCE
 bharti-walmart.in/
 corporate.walmart.com/ou
r-story/locations/india
 Livemint.com
 Wikipedia.org
 Wall Street Journal
 Hindustan Times
 Authorstream.com