Foreign investments
12 important questions on Foreign investments
What is foreign investment
Explain how FI is regulated
It can be used to promote or restrict FI: screening + regulating FI applications, which depend on 2 things:
- Differs per country from open (minimal) reg. To closed ( strong reg. & supervision)
- Open economies might have less strict regulations than closed ones also transitional economies face stricter regulations.
What is the purpose of the national law that governs FI
- Promoting: Local productivity + technical development
- Encouraging: Local participation
- Minimising: Foreign competition in economic areas already served well by local businesses.
- Higher grades + faster learning
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Explain the types limitations/ restrictions of FI + examples
- Business forms >
- have/include local participation
- Obliged to disclose activities to the public
- Limited % of foreign equity >
- May own up to a certain % of equity
- Economic sectors (sectoral limitations) >
- Sectors exclusive for the state/nationals —> public utilities, vital for national security
- Limited % of participation in certain sectors —> to limit the influence of Foreign investors in domestic politics, social economic affairs
- Sectors with full/majority foreign ownership —> local development resources are limited. Where FI will increase jobs(local) + where Foreign export trade increases
Explain priority sectors for FI + examples
- Capital intensive
- Support tech transfer
- Export oriented
They use incentives to boost the FI in these industries example of incentives are:
- Tax holidays/ tax incentives (so lower taxes)
- Easier application + approval procedures
Explain how Geographical limitations are categorised
- Free trade area's: 2 or more states trade across and within border free from customs tariffs and other restricted area's
- Free City: An entire city open to trade (international)
- Free trade zone & sub-zones: (FTZ) like free city but smaller and within or near a port city. The sub zones are associated but physically different from free trade zones. They accommodate limited purpose trading activities —> single manufacturing plants
Explain what the gov. security transactions regulations
- Defining the form that securities take,
- Protection of buyers and sellers,
- Clearance and settlement procedures,
- Insider trading
- Takeovers.
Explain the intentions and actions of a hostile takeover/ foreign raiders
Actions: Buy heavily the stock of target company
Explain protection agains (hostile) takeovers (actions by companies)
- restrictions on share transferability,
- cross-ownership of shares
- restrictions on the voting rights of publicly held shares.
Explain insider trader regulations
Further explanation:
- they trade public info > info assessable to public
- or material non-public info > info that is not public info and which could contain sensitive issues that could affect stock prices
Legal to posses but illegal to sell as that would be insider trading
Explain ENFORCEMENT OF SECURITY REGULATIONS INTERNATIONALLY
- 1989 Convention on Insider Trading
- assist the regulatory agencies of its signatory states
- establish a mechanism for the exchange of informationso that those agencies can better supervise their securities markets.
FOCUS on:
- uncovering the insider trading activities
- does not attempt to establish uniform enforcement provisions or sanctions.State is allowed to ask assistance from other member states.
Explain what an insider trader is
The question on the page originate from the summary of the following study material:
- A unique study and practice tool
- Never study anything twice again
- Get the grades you hope for
- 100% sure, 100% understanding
