Theories of Foreign Direct Investment
Theories of Foreign Direct Investment
Foreign Direct Investment, or FDI, is a type of investment that involves the injection of foreign funds into an enterprise that operates in a different country of origin from the investor. Foreign direct investment has many forms. Broadly, foreign direct investment includes "mergers and acquisitions, building new facilities, reinvesting profits earned from overseas operations and intracompany loans”.
Foreign direct investment incentives may take the following forms:
• low corporate tax and individual income tax rates • tax holidays • other types of tax concessions • preferential tariffs • special economic zones • EPZ – Export Processing Zones • Bonded Warehouses • Maquiladoras • investment financial subsidies • soft loan or loan guarantees • free land or land subsidies • relocation & expatriation • infrastructure subsidies • R&D support • derogation from regulations
Once firms have decided to enter a foreign market, they have to choose the best mode of entry. Firms can use six different modes to enter foreign markets: 1. Exporting, being a temporary strategy is like a stepping stone in the international expansion process for most firms. In the past, Seagate was a well know example which concentrated its manufacturing operations in one location enables it to move down the experience curve and achieve location economies. 2. Turnkey projects, are popular because firms can continue with normal business operations while the contractor handle the time consuming and resource intensive projects for a foreign client. Singapore shipyard is reputable for handling sophisticated turnkey projects regardless of is complex requirements and other considerations. This industry is well known in the economic development for the last 40 years and will continue to play the critical role in our economy in order to achieve the goal for Singapore to become a leading international maritime link. Another example
Foreign Direct Investment, or FDI, is a type of investment that involves the injection of foreign funds into an enterprise that operates in a different country of origin from the investor. Foreign direct investment has many forms. Broadly, foreign direct investment includes "mergers and acquisitions, building new facilities, reinvesting profits earned from overseas operations and intracompany loans”.
Foreign direct investment incentives may take the following forms:
• low corporate tax and individual income tax rates • tax holidays • other types of tax concessions • preferential tariffs • special economic zones • EPZ – Export Processing Zones • Bonded Warehouses • Maquiladoras • investment financial subsidies • soft loan or loan guarantees • free land or land subsidies • relocation & expatriation • infrastructure subsidies • R&D support • derogation from regulations
Once firms have decided to enter a foreign market, they have to choose the best mode of entry. Firms can use six different modes to enter foreign markets: 1. Exporting, being a temporary strategy is like a stepping stone in the international expansion process for most firms. In the past, Seagate was a well know example which concentrated its manufacturing operations in one location enables it to move down the experience curve and achieve location economies. 2. Turnkey projects, are popular because firms can continue with normal business operations while the contractor handle the time consuming and resource intensive projects for a foreign client. Singapore shipyard is reputable for handling sophisticated turnkey projects regardless of is complex requirements and other considerations. This industry is well known in the economic development for the last 40 years and will continue to play the critical role in our economy in order to achieve the goal for Singapore to become a leading international maritime link. Another example
References: Ijaz Nabi and Manjula Luthria. (2002) Building competitive firms, incentives and capabilities, Washington, DC, The World Bank. Wendy Dobson & Chia Siow Yue (1997) Multinationals and east Asian integration, Canada & Singapore, International Development Research Centre. David M, Marchick & Matthew J. Slaughter (2008) Global FDI Policy, correcting a protectionist drift, USA, Council on foreign relations. Temasek Holdings Limited (2006) announces investments in Fraser & Neave Limited URL:http://www.temasekholdings.com.sg/media_centre_news_releases_081206.htm Charles Oman (2000) Development centre studies, Policy competition for foreign direct investment, A study of competition among governments to attract FDI, USA, OECD. Abraham A. Azubuike.(2006) Accessibility of Government Information as a Determinant of Inward Foreign Direct Investment in Africa, ECA Library, United Nations Economic Commission for Africa Addis Ababa, Ethiopia URL:http://ifla.queenslibrary.org/IV/ifla72/papers/100-Azubuike-en.pdf SPRING, franchising and licensing association (Singapore). URL:http://www.spring.gov.sg/EnterpriseIndustry/LEAD/Pages/lead-fla.aspx WINDS, Multilateral Agreement on Investment, URL:http://www.apfn.org/THEWINDS/archive/economy/mai11-97.html