1. Foreign Investments;
Meaning, Purpose, and Process
AIU Online
Introduction to International Business
MGMT220-1201A-04
Prof. Ryan Repich
Victoria Rock
January 29, 2012

2. ABSTRACT
Foreign Investment is the flow of capital from one nation to another in exchange for significant
ownership stakes in domestic companies or other domestic assets and a connection towards
globalization.

3. INTRODUCTION
We will attempt to answer several important questions and aspects to foreign investment. These
answers will include definition, purpose of regulations, issues that concern management in
regards to markets and sites, and the steps taken during the screening process.

4. FOREIGN INVESTMENT DEFINATION
Foreign investment is simply any allocation of resources such as; assets, cash, debt, buildings,
expertise, people, etc., that a company in one country allocates to an investment in another
country. It is regulated differently in each country in order to protect themselves from external,
disruptive stimuli or to protect against perceived financial exploration. (Chang, 2003)
WHAT IS THE PURPOSE FOR FOREIGN INVESTMENT
REGULATIONS?
Foreign investment regulations are made to set rules just like any other company. They are
often set to address national security concerns as well. Each country sets their own foreign
investment regulations which can range from; requiring of approval of investment to board
restrictions on the basis of economic security and cultural policy. Recently due to national
security issues, some countries have also introduced lists of strategic sectors in which foreign
investment requires government review and approval. There are however, according to an article
in the GAO Highlights, a core set of issues that all country’s share. These issues include; the
defense industrial base, investment in the energy sector, and investment by state-owned
enterprises and sovereign wealth funds. (GAO, 2008)
LIST AND DISCUSS THE FOREIGN INVESTMENT REGULATIONS
Since each country has its own foreign investment regulations, it would be hard to try and list
each of them from each country. While some restrict certain sectors where foreign investment is
not allowed, others allow investment in specific sectors only after governmental review and
approval. Also in some countries in certain sectors an informal approval is required before the
application process can even begin. (GAO, 2008)
The table below, prepared by the GAO, shows a comparison of some countries in regards to
the foreign investment review process.

5. Table 3:
Common Approval
Elements National Sectors Reasons for conditions or
Relevant FDI security Reviewing requiring review/ Review time mitigation
laws Formal review review body review restrictions frames Appeal agreements
Canada Investment Yes No Industry Specified To ensure 45 days, with No Yes
Canada Act, Canada and net benefit to a possible
1985 Canadian Canada 30-day
Heritage extension
China 2006 Yes Yes Ministry of Specified National Not specified No Yes
Regulations Commerce economic
for Mergers security,
and protection of
Acquisitions critical
of Domestic industries,
Enterprises purchase of
by Foreign famous
Investors trademarks
Catalog for or traditional
the Chinese
Guidance of brands
Foreign
Investment
Industries
France Law 2004- Yes Yes Ministry of Specified Public order, 60 days Yes Yes
1343 Economy, public safety,
Decree Finance, and national
2005-1739 Employment defense
Germany 2004 Yes Yes Federal Specified Essential 30 days Yes No
Amendment Ministry of security
to 1961 Economics interests,
Foreign and disturbance
Trade and Technology of peaceful
Payments international
Act coexistence,
disturbance
of foreign
relations
India Foreign Yes Yes Foreign Specified National 30 days, in Yes No
Exchange Investment security, practice 3
Management Promotion domestic, months
Act, 1999 Board cultural and
economic
concerns
Japan 1991 Yes Yes Ministry of Specified National 30 days, Yes Yes
Amendment Finance security, ministries
to the public order, can extend
Foreign public safety, to 5 months
Exchange or the
and Foreign economy
Trade Act of
1949
The Financial No No N/A N/A Competition, N/A N/A N/A
Netherlands Supervision financial
Act of 2006 market
oversight
Russia 1999 Federal Yes Yes Federal Anti- Not currently Protection of 30 days for Yes Yes
Law on Monopoly specified foundations anti-
Foreign Service of the monopoly
Investments constitutional review
order, (No specified
national time frames
defense and for national
state security
security, review)
anti-
monopoly
United Arab Agencies No No N/A N/A Economic N/A N/A N/A
Emirates Law of 1981 and
Companies demographic
Law of 1984 concerns

6. United Enterprise Yes Yes Office of Fair Not officially Public 6 months, in No Yes
Kingdom Act of 2002 Trading specified interest, practice 30
control of days
classified
and sensitive
technology
United Exon-Florio Yes Yes Committee Not officially National 30 days, with No Yes
States Amendment on Foreign specified security a possible
to the Investment 45-day
Defense in the United investigation
Production States
Act of 1950,
as amended
(GAO, 2008)
WHAT ARE 2 ISSUES THAT CONCERN MANAGEMENT WHEN
SCREENING POTENTIAL MARKET SITES?
Two issues that concern management are the demands for product in those markets and sites
as well as the business environment in those sites. Essentially demand means the quantity of its
products it will be able to sell and the price it will be able to realize for its products. Similarly,
the business should consider the social forces, economy, political environment, legal
environment, technology, and any factors related to industry. (Graham, 2005)
LIST AND DISCUSS THE STEPS IN THE SCREENING PROCESS.
The demand should be accessed through a process of evaluation.
 Finding the problems that the customers are facing.
 If the marketer is able to offer a product or service that would persuade the potential
customers to try out the product.
 If the marketer will be able to displace the present competitors
 If the marketer can match the price of the present competitors or can perform better
than them.
 If the business has the potential of expanding.

7.  Check into the social/economic forces, the political/legal environment, the current
state of technology, and local/global competition. (Graham, 2005)
CONCLUSION
Although starting a business in another country is very appealing and accepted, there
are many factors that need to be investigated before jumping into it. What can moving the
business to another country do for the company as well as the economic affect it will have on
that country as well as the country the business is leaving.

8. REFERENCE
Chang, H.-J. (2003, March). Foreign Investment Regulation in Historical Perspective. Retrieved from GPF:
Global Policy Forum: http://www.globalpolicy.org/component/content/article/213/45615.html
GAO. (2008, February). Foreign Investment: Laws and Policies Regulating Foreign Investments in 10
Countries. Retrieved from GAO Highlights: http://www.gao.gov/new.items/d08320.pdf
Graham, J. &. (2005, June 18). Understanding Foreign Direct Investment. Retrieved from Going Global :
http://www.going-global.com/articles/understanding_foreign_direct_investment.htm