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Foreign Direct Investment

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Foreign Direct Investment

  1. 1. FOREIGN DIRECT INVESTMENT FDI IN BRUNEI DARUSSALAM PRESENTED BY: SYAFIQAH LINA HIDAYAH HNDBM/11/02(G1)
  2. 2. CONTENTS:  Introduction to FDI  Types & Method of FDI  Importance & Barriers to FDI  Advantages & Disadvantages FDI  How Brunei attract FDI  World’s FDI incentives that Brunei can adopt  Latest news of Brunei attracting FDI
  3. 3. It is a direct investment into production/ business by company of country A into country B either by: Buying a company Expanding operations in exiting business operations Simply defines as an investment made by a company in one country, into a company of the another country. Usually involves participation in management, joint- venture, transfer of technology and expertise.
  4. 4. International Business 5e Growth of World FDI vs. GDP
  5. 5. International Business 5e Reasons for FDI Growth Increasing globalization International mergers and acquisitions Entrepreneurship and small firms
  6. 6. STRATEGIC ASSETS SEEKING
  7. 7. Inward (inflow) is when the foreign capital are invested in local resources. The inflow of foreign capital into Brunei For example : General Motors decides to open a factory in Brunei. They are going to need some human capital. That human capital is inward FDI for Brunei. Inward FDI is encouraged by Tax breaks, subsidies, low interest loans, grants. Inward FDI is restricted by Ownership restraints or limits, differential performance requirements
  8. 8.  Outward (outflow) is when the local resources are invested to another country  The outflow of Brunei capital to other country  For example: Brunei invest in Dorchester Hotel  Outward FDI is encouraged by Government-backed insurance to cover risk  Outward FDI is restricted by Tax incentives or disincentives on firms that invest outside of the domestic country.
  9. 9.  An investment involve the flow of FDI by building up  New production capacities  Expansion of the existing production  Greenfield Investing is offered as an alternative to another types of investment, for example as mergers and acquisitions, joint ventures, or licensing agreements.
  10. 10.  An investment made by a multinational company in different nations.  It is the investment made for conducting similar business operations.  For example: Apple Inc. factory in Brunei  Horizontal FDI results in expansion of the parent company and brings FDI in the other economy
  11. 11.  Backward Vertical = It is when an industry abroad provides inputs for a firm's domestic production process  For example: Brunei Shell Petroleum with Royal Dutch Shell  Forward Vertical = industry abroad sells the outputs of a firm's domestic production process.  For example: when Volkswagen entered the United States market it acquired a large number of dealers rather than distribute its cars through independent United States dealers
  12. 12. Resource Seeking This investment aimed to get production factor supplies at low cost. The investment is seeking access to existing resources For e.g. : China low labour cost The most important among these are: 1. Raw materials, 2. Labour, 3. Public incentives 4. The chance to restrain logistic costs
  13. 13. MARKET SEEKING Its aim is to realize a direct presence in the foreign market to quickly develop sales revenue and control the marketing mix policy. It allows firms to pursue strategic goals such as threatening competitors by entering their home market. An example is General Motors’ investment in China which is market seeking because the cars built in China are sold in China.
  14. 14. Strategic asset seeking  It is an investment led to increase self- competitiveness through the acquisition of strategic assets such as technologies not available in the home market, or rather links with global value-chains.  This kind of investment typically regards firms located in emerging or developing countries (particularly China), and are often undertaken for various reasons such as to lower costs of production or the will to expand on overseas markets. Similarly to the efficiency seeking firms, the strategic asset seekers aim to capitalise on the advantages of the common ownership of a network of activities and capabilities in diverse environments.  For example: China low labour cost so the Apple Inc. built its factory there.
  15. 15.  by incorporating a completely owned subsidiary or company anywhere  by acquiring shares in an associated enterprise  through a merger or an acquisition of an unrelated enterprise  participating in an fairness joint venture with another investor or enterprise
  16. 16.  Resource for economic growth  Money inflow from overseas  Business grows in several countries  FDI & Economic development  Opportunities  Competitive requirement  Corporative Activities  Branch plant or subsidiary company operations  Rise in National Income
  17. 17.  Formal restrictions on FDI include limits on foreign ownership  Screening and approval procedures  Informal barriers may also be important  Barriers to investment access, operations, areas, products, ownership and land use  Barriers on labour, policy, institutional and control variables  Political controversial
  18. 18.  New jobs are created  New technology are implemented  Availability of scarce of factory of productions, products and raw materials  Improving the balance of payment though import and export substitution  Revenue to the government through taxation  Improved political relations  To get additional expertise  Increase in the number of competition  Expand local business  Stimulate the local economy and thus increasing in GDP
  19. 19.  Political changes leads to “Expropriation”  Cultural and political indifference  Investing is more expansive than exporting  FDI always at risk  Threat to local product  Takes away employment opportunities  It brings harm to the environment  Foreign market recession  Inequality of income distribution
  20. 20.  Improving its domestic infrastructure  Improving logistic and transportation  Stable legal and financial framework  Providing fiscal incentives  Increase awareness  Remove the difficult regulations  Reduce corruption and encourage transparency  Enact policies to provide training and skills upgrading to develop their workforce
  21. 21.  Low corporate tax  Tax holidays  Preferential tariffs  Special economic zones  EPZ - Export Processing Zones • Bonded Warehouses • Loan guarantees • free land or land subsidies • job training & employment subsidies • infrastructure subsidies • R&D support • derogation from regulations (usually for very large projects)
  22. 22. Incentives to further attract FDI
  23. 23. Incentives to further attract FDI
  24. 24. Borneo Bulletin – Thursday 22 November 2012 The study has also identified several land zones along the coastal corridor suitable for industrial and commercial use –  Telisai Energy Park for petrochemicals and heavy industries;  Panaga for general industries, warehouses and assembly;  Anduki for logistics and warehouse uses;  Keriam for light manufacturing, processing and distribution; Brunei Creative & Knowledge Industries Precinct located around the Agrotechnology Park  Universiti Brunei Darussalam (UBD) for knowledge- based industries, research and education, high tech business and creative industries;  Brunei Aerotech Precinct located around the Brunei International Airport, for business, retail, leisure and entertainment services, as well as storage and 'distribution network facilities  Pulau Muara Besar for petrochemicals and logistics.
  25. 25. The key actions are –  To ensure the incentives offered by Brunei are competitive  The process of creating special purpose zones can respond to new investment proposals;  To review the mechanisms for investment attraction and facilitation, and ensure decision-making is expedited within stated timelines;  To adopt the recommended sustainable urban development areas (SUDAs), ie Telisai Energy Park, Brunei Creative & Knowledge Industries Precinct and Brunei Aerotech Precinct, and establish a development authority for each SUDA;  To give statutory effect to the plans recommended in this study;  To ensure the private sector can take a lead role in future urban development including the release of registered title land for purchase, and foreign investors are offered secure long-term leasehold of required land for economic development and to prepare a State Land Management Plan where ministries will be required to prepare a business case to identify future land requirements and the government to prepare a strategic infrastructure development strategy with funding provided to enable a continuous rollout of infrastructure to support the local construction industry. Borneo Bulletin – Thursday 22 November 2012
  26. 26. THE END

Notes de l'éditeur

  • Pioneer
  • Spur = Branch

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