1.Introduction. Foreign Direct Investment Is Becoming An

1512 WordsMay 3, 20177 Pages
1. Introduction Foreign direct investment is becoming an increasingly important issue in today’s world, with the increasing globalization of capital markets. Foreign direct investment can occur when companies make investments abroad in multiple ways. Companies can invest in properties, plants and equipment abroad, invest in foreign businesses they already own, or acquire existing business assets of foreign companies. Defining the difference between direct investment and portfolio diversifying investments is an important distinction to make, and often depends on the definition of foreign direct investment that is being used, but generally at least 10% ownership of the equity in the foreign business is required in order for it to be…show more content…
Ignoring the issues with the assumption of the ability to borrow unlimited funds at a fixed interest rate, there is still the issue that investors in foreign businesses are more likely to seek foreign investing partners, in order to obtain a local partner in order to create a presence in the region of the foreign investment, and it has become apparent that much of the debt that is raised for foreign investments comes from foreign sources, rather than domestic sources. As stated earlier, the advances in technology have allowed for a more globalized system of capital markets, but that system is still far from perfect integration across all jurisdictions. 2. The United States and the Effect of FDI on the Economy The United States has been the world’s largest recipient of foreign direct investment since 2006. This is largely due to the fact that the U.S. investment climate is one of the most attractive ones around the globe, due to the predictability of consistent regulatory policies, legal protections, a highly innovative environment, skilled workers, and most importantly, the world’s largest consumer market. The United States has the most open investment landscape of any country in the world, which affords national treatment to foreign direct investments, regardless of the country of origin, due largely to the bilateral investment treaties entered into by the U.S. Foreign direct investment in the U.S. has continued to rise through more recent years,
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