chapter 5 international investment law.ppt

Chapter 5 International investment law Foreign direct investment FDI is a flow of long term capital based on long term profit considerations and is associated with a significant degree of influence or control by the investor in the management of the enterprise. FDI plays a major role in the internationalization of business. Profound changes have occurred in the size, scope and method of FDI. Information technology enables management of FDI far easier. Investment policy changes include deregulation and privatization of many industries. Benefits of FDI To the company: New markets and marketing channels Cheaper production facilities Access to new technology, products, skills and financing. Benefits of FDI To the host country: New technologies, capital, process, products, organizational skills. A source of new technologies, capital, processes, products,. Organizational technologies and management skills. Determinants of FDI Foreign investment regime General investment environment Foreign investment regime stability of the legal rules Implementation transparency effective system of dispute resolution General investment environment Infrastructure Human capital Entrepreneurial skills Legal, judicial and administrative structures Financial and banking sectors Political interference or instability Tax concessions and other profit-related incentives are relevant only if the general investment climate is conducive for profit making. Risks of FDI in China Commercial and non-commercial risks Capital, raw materials, skilled labor, local management talent To mitigate commercial risk: reasonable price, protection of IP, repatriation of its profits. Non-commercial risk: political risk Vague lines of authority Forms of FDI in China Chinese-Foreign Equity joint venture China-foreign contractual joint venture Wholly foreign-owned enterprise Chinese-foreign equity joint venture Jointly established, operated, Profits, losses, and risks should be shared in proportion to t