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					Total FDI-related foreign direct investment
1.1. The concept of FDI
According to the International Monetary Fund IMF, FDI is defined as "an investment
with long-term relationship, under which an institution in a world economy (direct
investor) obtained from a long-term benefits Enterprises located in a different economy.
The purpose of the direct investment is like to have more influence in the management of
enterprises located in other economies that
United Nations Conference on Trade and Development UNCTAD also made a business
of FDI. Accordingly, FDI inflows include capital provided (either directly or through
related companies) by the foreign direct investment for FDI enterprises, or capital that the
foreign direct investment received from FDI. FDI consists of three components: equity
capital, reinvested earnings and loans within the company.
The international economic definition: foreign direct investment was the purchase of
property in this country or an entity controlled economy of other countries. That is an
amount that investors paid to an entity's foreign economic influence decisions with
economic entities that control or increase in the economic entity did.
Law on Foreign Investment in Vietnam in 1987 introduced the concept: "Foreign direct
investment is that the organization or individual foreign countries into Vietnam or of
capital in foreign currency assets are any Vietnamese government Male approved for
business cooperation on the basis of contracts or joint ventures established enterprises or
enterprises with 100% foreign capital under the provisions of this law "
Organization of Economic Cooperation and Development (OECD) introduced the
concept: "a direct investment enterprise is an enterprise with legal personality or without
legal status in which direct investor owns less most often 10% shares or voting rights.
The crux of direct investment is intended to exercise the right to control the company. "
However, not all of which were run, using 10% as determined milestones FDI. In fact
there are cases of property ownership rate in the investor's business is less than 10% but
they still are entitled to executive management of enterprises, while the much larger but
still only at the portfolio investment next.
From these concepts can be understood on an overview of foreign direct investment as
follows: "Foreign direct investment FDI in one country is an investor in other countries to
the capital in cash or any assets in that country to obtain ownership and management or
control of an economic entity in that country, with the first maximize its interests. "
Assets in this concept, according to international practice, be it tangible assets
(machinery, equipment, process technology, real estate, contracts and other valuable
licenses ...), financial intangible property (ownership of little knowledge, know-how and
management experience ...) or financial assets (shares, stocks, bonds, debentures, ...).
Thus FDI is always a form of economic relations with foreign elements. Two basic
characteristics of FDI is a shift within capitalism and international investors (legal
entities, natural persons) directly participate in the activities funded and managed objects.


The common form of FDI and their basic
characteristics
1. Joint venture enterprises
Joint venture enterprises with foreign joint venture is called the form most widely used of
foreign direct investment in the world ever. It tool to penetrate foreign markets, legally
and effectively through cooperative activities
The concept of joint venture is a form of economic organization donah nature
international, formed from the difference between the parties on nationality,
management, systems thogn financial, legal and cultural identity; activities on the basis of
the contribution of capital, labor and management with responsibility for profit and risks
may occur; venture activities are broad, including production and business activities,
provision of services, basic research activities and research and development.
For countries receiving investment
-Advantages: help to solve the lack of capital, to help diversify the products, technology
innovation, create new markets and create opportunities for employees to work and study
experience of foreign managers
-Cons: takes more time to negotiate issues related to shoulder the investment projects,
often appear in conflict management of the business; foreign trade partners interested in
global interests, so double lcu venture suffered losses because of interest elsewhere.;
personnel changes at the parent company can influence the future development of the
venture.
For foreign investors;
-Advantages: take advantage of available distribution system of the host country partners,
is invested in the business to make profits, prohibited areas or restrictions on the form
100% foreign enterprises outside; penetrate the traditional market of the host country. Do
not waste time and costs for market research and build new relationships. Sharing costs
and investment risks
Cons: look at the difference in cost between the two investment partners, take time to
negotiate all matters relating to projects DTU, valuation of assets contributed as capital to
create jobs for the laborers of domestic work; not active in business management and
administration, easily lost business opportunities difficult to resolve differences in
customs and culture.

2. Enterprises with 100% foreign capital
Enterprises with 100% foreign capital is also a form of enterprises invested abroad but
less common form of joint ventures in international investment activities.
The concept of 100% foreign capital is a business entity with legal personality, was
established based on the goals of investors and host countries.
Enterprises with 100% foreign capital operating activities under the management of
foreign investors but still must depend on conditions on the business environment of the
host country, which is the DK on politics, law kt interesting cultural level of competition
...
Enterprises with 100% foreign capital have legal status as an independent legal receptor
activity under the laws of host countries. Established as a limited liability company or
joint stock companies.
For receiving countries:
-Advantages: State revenue from land rent was right, although the company tax losses;
solve job without using capital investment focus to attract capital and foreign technology
in the flexible in export promotion, access to foreign markets
-Cons: difficult to acquire management experience and technology overseas to improve
their management staff, technical personnel in enterprises in the country.
For foreign investors
-Advantages: active management of the business done by Global Strategy Group; rapid
deployment projects, the initiative is the recruitment and training of human resources to
meet development requirements general corporate
-Bad: investors must bear the full risk of the investment costs have more access to
research new markets; not penetrate into these areas has greatly benefited the domestic
market large, difficult relationship with the State management agencies in host countries.

3. Forms of business cooperation on the basis of business cooperation contracts
This form is a form of investment in which the distribution of responsibilities and Hia
business results for each party to conduct investment business without creating a new
legal entity
Business cooperation contract is a document signed between the competent
representatives of the parties to business cooperation contracts, clearly define the
performance of distributed business results for each party
Characteristics as the parties signed business cooperation contract, in the process of the
partnership business may be established to monitor the coordinating and supervising the
implementation of business cooperation contracts. Division business results: no form of
partnership profit distribution and risk sharing, which divide them by the business results
or capital contribution under the agreement between the parties. Business cooperation
parties perform their financial obligations for the host country separately. Partnership is a
legal business entity operating under the laws of host countries subject to the laws of host
countries. Brackish rights and obligations of the parties to business cooperation contracts
dowjc record in business cooperation
For receiving countries:
-Advantages: help to solve the lack of capital, lack cnghe, create new markets but it
ensures national security and grasp the right to run the project
-Cons: difficult to attract investment, made for only a few areas for income
For the investor:
-Advantages: take advantage of available distribution system of the host country partners
in the fields of investment restrictions penetrate the traditional market of the host country;
not waste time and expenses for the market research and build new relationships; not
affected by large differences in cultural sharing costs and investment risks.
-Cons: may not directly managing the project, cooperation with host countries for lack of
nurses certainly make investors afraid.

4. Investment under BOT
BOT (build - operate - transfer) is a term for a model or a structure to use private
investment for the construction of the infrastructure remains dedicated to the public
sector. In a building BOT project, a private business people are privileged to build and
operate a project which is usually done by the government. This work may be the power
plants, airports, bridges, roads, bridges ... At the end of the operation of private
enterprises will transfer the ownership of government projects. In addition there BOT
BTO and BT.
BOT is a written contract signed between foreign investors with the competent bodies of
the host country for investment in construction of infrastructure (including expansion,
nagn level modernization projects ) and business in a certain time to recover capital and
reasonable profits, then transferred without compensation for the whole project host
country.
Construction contract to transfer the business and construction contracts BTO transfer
BT, formed similar to BOT but there are differences: for BTO after completion of
construction works of foreign investors transferred to the host country and host country
government for the right business that works or other works for a time sufficient to
complete the entire investment and have a satisfactory profit on construction works
development and transfer.
For the BT contract, after completion of construction works of foreign investors to
transfer back to the host country and host country governments paid in cash or with assets
that match the capital investment has dropped and a reasonable rate of profit.
Established businesses implement BOT, BTO and BT contracts, although the form of
joint venture enterprises or enterprises with 100% foreign capital, but partners with
contract performance management is the state agency in host countries. Narrow field of
contract other than the FDI, mainly applied to development projects in infrastructure, are
entitled to higher investment incentives than other forms of investment and especially
when the point Expired activities, should transfer without compensation limit foundations
and floors were built to exploit the host country

For the host:-good: to attract capital investment into infrastructure projects co9u requires
large capital investment, thus reducing pressure on the state budget, and can be quickly
the complete infrastructure to help stimulate the domestic resources and attract more FDI
for economic development.
-Cons: difficult to get management experience and works hard to control. On the other
hand, the state must bear all risks beyond the control of investors.
For foreign investors:
-Advantages: efficient use of capital is guaranteed; proactive management, administration
and business autonomy profit sharing and hip were the host state to ensure, to avoid
unexpected risks beyond control.
-Bad: the negotiation and execution of BOT contracts trade more difficult and costly time
and effort.

5. Investment model through the parent company and subsidiaries (Holding company)
Holding company is one model of organization management is widely recognized in most
countries with economies in developed markets.
Holding company which owns a stake in another company sufficiently to control
operations and executive management through the company or to influence selection of
Board members.
Holding company was established as joint stock companies and limited their activities in
the ownership of capital, strategic decisions and monitor the management activities of the
subsidiaries, the company maintains the right control of their business activities
independently, creating a lot of advantages:
-Allowing investors to raise capital to deploy many different projects but also create
favorable conditions for them to coordinate activities and support subsidiaries in the tieps
marketing, consumption goods regulate the income and costs of financial operations.
-Management of their capital contributions in other companies as a unified and
responsible decision making and strategic planning to coordinate the activities and
finances of the group of companies.
-To plan, direct and control the flow of capital flows in the portfolio. Holding company
can perform all activities financed investments and subsidiaries provide financial services
internal to the company.
-Provide subsidiary services such as internal audit, external relations, market
development, planning, research and development (R & D) ...

6. Form of company shares
JSC (Joint Stock Company Limited) is an enterprise in which the charter capital is
divided into equal portions called shares the shareholder is only liable for debts and
obligations of other assets enterprises within the enterprise capital contributed to the
Shareholders may be organizations or individuals with the maximum number is
unlimited, but must meet requirements on minimum number of shareholders. Featured is
the company's shares it may issue securities to the public and shareholders have the right
to freely transfer their shares to others
Organizational structure, joint stock companies must have shareholder, board and
directors. Often in many countries around the world, shareholder or group of shareholders
owning more than 10% of ordinary shares are entitled to participate gima close
management activities of the company stock. Shareholders of all shareholders with voting
rights is the highest decision body of the company shares
In some countries, limited stock company with foreign capital established under way: the
establishment of new shares of foreign invested enterprises (joint-venture enterprises and
enterprises with 100% foreign owned) are operating, redeem shares of domestic
enterprises in the equitization.

7. Mode branches of foreign companies
This form is distinguished form the company 100% foreign capital in that branch is not
considered an independent legal entity while the child is often a company independent
legal entity. The responsibilities of the company you are usually limited in scope in the
host country assets, while the responsibility of the branch under the provisions of a
country, not just limited to property within the branch, but also be open wide to all the
assets of the parent company overseas.
Branches are allowed to deduct the losses in the host country and the costs to establish
the initial earnings of the parent company overseas. In addition, the branch also deduct a
portion of management costs quna overseas parent company to the taxable income in the
host country
The establishment of branches is often simpler than the establishment of subsidiaries. Do
not set up an independent legal entity, the establishment of branches of non-compliance
with regulations established companies, often through the register at the competent
authorities of the host country
8. Form partnerships
A partnership is an enterprise must have at least two general partners, in addition to the
general partners can have limited partners. The partnership members must be individuals
who are qualified, reputable professional and responsible with all their assets on
obligations of the company; limited partners only liable for the debts of company within
the amount of capital contributed to the company. Company or partnership may not issue
any type of securities. The general partners have equal rights in deciding the issues lsy
management company, while limited partners are entitled to share profits according to the
rate specified in the charter company but not participate in company management and
operation business on behalf of the company.
Unlike venture enterprises and enterprises with 100% foreign investment form is
characterized by the company for money to relatives of unlimited liability, compact
structure. This form of investment is suitable primarily for small businesses, but because
there are obvious advantages should also be big business interests.
The company released form partnerships in countries to create more opportunities for
investors to form investment choices to suit the requirements, their interests. In fact some
types of services such as legal counseling, medical, architectural design .. has been
growing rapidly. These are services that consumers can not check the quality of supply
before using, but the health impact lives and property of consumers to use. The
establishment of a partnership form of investment is appropriate in the development and
provision of services mentioned above. In particular those which act as limited partners
and limited also responsible professionals who are relatives organizations operating
partnership, service providers and subject to unlimited liability in the entire property of
them.


9. Type of investment and merger acquisition (M & A)
Most M & A are made between the TNC and large focused on automotive service
industry, pharmaceuticals, telecommunications and finance in developing countries.
Primary purposes:
-Exploiting the advantages of the new market that truog international trade or investment
in new channels is not traditionally delivers the performance you expect. M & A activity
creates opportunities for companies to quickly expand out activities in foreign markets.
-By the way M & A, the TNC can be merged his company with another form thnah a
corporate giant active dog in many cases, or different companies also operate in a field
can be merged to increase the global competitiveness of corporations
-The company for the purpose of internationalizing the product want to fill gaps in their
distribution network on the world market
-Paths through M & A company can reduce the cost of each field of research and
development production, distribution and circulation.
-M & A creates conditions favorable for the restructuring of industry and the structure of
industry in the country, so this method plays an important role in the development
industry in all countries.
Activities classified into three categories:
Horizontally-MA occurred when two of the same company operating a manufacturing
business sector wants to form a larger company to increase competitiveness, expand
markets with one of the two types of advance which the manufacturing company .
Vertically-MA occurred when two company operating in two different domains but the
service is dominated by a parent company, the interest for which this happens in the
company thwongf transnational
-MA in the direction of diversification or a combination often happens when big
companies merge with each conducted with the aim to minimize risks and avoid losses
when a company own market penetration.

Compared to traditional investors, from the perspective of the investment-receiving
countries:-The additional investment in the traditional form of additional investment on a
certain amount of FDI for development investment, then all forms of MA weak transfer
property from existing businesses in the host country for foreign companies. However,
long term, this method was also attracted capital from outside the host country by
expanding the scale of the implant business.
-Regarding job creation, investment form the traditional to create immediate jobs for the
host country, while the form of M & A not only does not create jobs but also increases
the stress on the job ( increased unemployment) for the host country. But in the long run,
this situation can be improved when firms expand production scale.
Regarding the restructuring of economic activity, investment truen's direct impact in
changes in economic structure knh through the construction of new enterprises, while M
& A does not have an impact in the short term
Regarding the competitiveness and national security, while investing tradition to boost
competition, the M & A does not significantly affect the status of competition in the short
term but long term may increase the monopolistic competition. On the other hand, M &
A can affect the security of the host country more traditional forms đư because the host
country's assets were transferred to foreigners.

				
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posted:5/30/2010
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