This document discusses foreign direct investment and why companies invest overseas. It provides several key reasons why companies establish foreign subsidiaries. Market seeking and resource seeking are two primary motivations, where companies seek new buyers for goods and services or find cheaper resources and labor abroad. Strategic asset seeking and efficiency seeking are also reasons, where firms invest overseas to build strategic assets or take advantage of distribution networks and technology. The document outlines both direct investment, involving physical investments in plants and equipment, and portfolio investment in foreign stocks and bonds.

1. FOREIGNTRADE
and

2. it is trading goods and services that
are destined for a country other than
their country of origin. Foreign trade
can also be investing in foreign
securities, though this is a less
common use of the term.

3. is used extensively as
a solvent in the
manufacture of
varnishes and
perfumes; as a
preservative for
biological specimens;
in the preparation of
essences and
flavorings; in many
medicines and drugs;
as a disinfectant and in
tinctures and as a fuel
and gasoline additive
Example ETHANOL

4. United States Brazil

5. “The act of parting with money to
obtain an asset, be it a share of
stock, a bond or real estate”
“The output of the community
during a given accounting period
which does not flow into
consumption”

6. The rate and extent of effective
utilization of foreign capital inflow
Flows of capital from one nation
to another in exchange for
significant ownership stakes in
domestic companies or other
domestic assets.

7. Example
has
foreign
investments
in dozens of
countries all
over the
world.
FORD FACTORY

9. Why Do
Companies
Invest Overseas?

10. Market Seeking
Firms may go overseas
to find new buyers for
their goods and services.

11. Resource Seeking
 A company may find it cheaper
to produce its product in a
foreign subsidiary- for the
purpose of selling it either at
home or in foreign markets.

12. Strategic Asset Seeking
Firms may seek to invest
in other companies
abroad to help build
strategic assets.

13. Efficiency Seeking
 Firms may seek to invest in
other companies abroad to
help build strategic assets,
such as distribution networks
or new technology.

14. 1. Recognition concerning the role of
foreign investments in promoting trade
relations among countries.
2. Offer a palliative remedy to the
perplexing problem of dollar short-age
and the introduction of modern
technology in the recipient countries.

15. 1. Direct Investment
2. Portfolio Investment/
Indirect Investment

16. Refer to investments made by
private individuals or private
corporations abroad.
When companies make physical
investments and purchases in
buildings, factories, machines and
other equipment outside their
home country.

17. Example TOYOTA

18. Example MCDONALD

19. Source of External Capital
and Increased Revenue
Development of New
Industries
Learning

20. Access to Markets
Access to Resources
Reduce Cost of
Production

21. Unstable Economic
Conditions
Unstable Political and Legal
System
Effect on Local Culture

22. Effect of Natural
Environment
Possible Exploitation of
resources-material/wages

23. category of investment
instruments that is more
easily traded, may be less
permanent, and do not
represent a controlling
stake in an enterprise.

24. Consist of foreign stocks
and bonds purchased by
individual investors,
insurance companies,
investment trusts, financial
institutions and others.

25. STOCKS
 dividend payments
 holder owns a part
of a company
 possible voting
rights
 open-ended holding
period
BONDS
 interest payments
 ownership of
bond rights only
 no voting rights
 specific holding
period

26. 100 Shares of
Stock
Chinese
Businessman U.S Corporation

27. Chinese
Businessman
Dividend Payments
Shareholder Decision
Sell the Stock

28. Tax Concessions
 “TAX- HAVEN”- is the absence of
income taxation, or the existence of
a form of income taxation that
exempts foreign investment

29. Income Tax Deferral
and Exemption
 “TAX- HOLIDAYS
 If the income tax is cut, the cash
flow from operations is speeded up,
and more funds are available to
finance current capital requirements.

30. Equal Treatment
 Ex: Investment law of Turkey
 All rights, immunities, and privileges
being enjoyed by domestic business
firms and industries are made
available on equal term to foreign
establishments engaged in the
same line industry

31. Economic Development
and Future Possibilities
 Foreign investors are attracted to
the countries where markets are
largest, and in many cases,
growing most rapidly.

32. Ownership of Real
State
 “PARITY RIGHTS” – amendment to
the Philippines Constitution to vest
upon American citizen equal rights
with the citizens of this country in the
matter of ownership, development,
and exploitation of natural resources.

33. Investment Incentives
Act
 Republic Act No. 5186 - “to
encourage Filipino and foreign
investments…in projects to
develop agricultural, mining, and
manufacturing industries”

34. Investment Incentives
Act
 Republic Act No. 5186 - “to
accelerate the sound development of
the national economy in consonance
with the principles and objectives of
economic nationalism”…

35. Investment Incentives
Act
 Pioneer Investment – those which
will produce commodities hitherto
not made in the Philippines or
which will utilize new technology
 Preferred Areas of Investment

36. Employment of Alien
 Republic Act No. 5171(Phil
Immigration Act 1940) . Some
countries, laws are enacted permitting
the entry of foreign investors and their
representative into their territories
whose stay is guaranteed for a sizeable
number of years.