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FDI attracted by privatization programs is not as likely to result in much new investment. (Depending on the terms of sale, the new owner may be required to undertake a certain amount of new investment or renovate existing equipment). When an existing domestic asset is sold, there is no direct increase in the capital stock, although the productivity of the existing capital should increase. FDI received is available for whatever purpose the seller chooses, including reducing an external gap, lowering taxes, or sustaining other current expenditures. The effect depends other current expenditures. The effect depends on what the seller (the government, in the case of privatization, or a private, in the case of a private asset sale to foreign interests) does with the proceeds: reduce other debt (which might ease pressure in the banking system), invest in another project (which would increase investment, as discussed above), or spend on other goods, primary consumption (which would increase aggregate demand and perhaps imports, with no increase in output capacity). To the extent that capital inflows support increased imports without a corresponding increase in investment, domestic saving are reduced.
FDI lows are as sustainable as the underlying attraction- stable policies and profitable opportunities. To the extent that an economy’s growth depends on a sustained inflow of FDI- for the level of investment, for technology and skill transfer, or for supporting an export strategy- the importance of maintaining those conditions is evident. Although FDI is not readily reversible, sharp drops on new flows can have repercussions if countries depend on it for future export growth. Similarly, to the extent that countries have increased resources derived from the foreign investment, a reduction in those flows will require perhaps difficult adjustments on the consumption front.
No contractual repayments are associates with FDI. Investors expect a return on their investment- generally a higher rate of return that on loans and bonds because of the higher risks and opportunity costs involved. Malaysia, which has been the beneficiary of substantial FDI, has grown rapidly: an estimated one- third of its current account receipts is now claimed by service payments on FDI. When FDI flows are sustained over a long period, foreigners inevitably came to own a substantial portion of the country’s capital stock in the sectors that attracted FDI. This prospect is not viewed with as much concern as it once was FDI is not likely to be volatile: once invested, the real asset is not going to more, although changes in ownership are possible. Eventually, a foreign investor may want to sell to a local partner or divest onto a local stock market, and the host country needs to be prepared for a repatriation of capital. In times of stress, however, investor may well find ways to get their capital out quickly. Many investors set as a target the recouping of their outlays (which are usually less than total project cost) within two or three years, through repatriated) profits.
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FPI potentially has a much wider range of effects, depending on the type of instrument and how it is used. It can occur through securities placed in foreign or domestic markets, including short-term funds and demand deposits. (The relation of these two instruments to physical investment may be limited; they may be much more a function of financial variables). Although many of its impacts can be similar to those of bank loans and FDI, portfolio investment can also have a much greater effect on domestic capital markets and interest rates. Whereas direct investment regimes, portfolio flows raise issues of financial and capital market regimes and their management. Portfolio investment touches more on issues of disclosure, accounting, and auditing that does direct investment.
Реферат опубликован: 11/02/2008