What are Foreign Portfolio Investors

Direct investment

term

Form of foreign investment.

1. Mark:Capital export by economic entities of one country to another country with the aim of acquiring real estate there, setting up permanent establishments or subsidiaries, acquiring foreign companies or participating in them with a share that ensures a decisive influence on corporate policy.

Contrast:Portfolio investment that is primarily used for financial investments.

2. Decision criteria: Tax advantages abroad, deviations in factor prices and competition law regulations, circumvention of trade barriers, securing the delivery of raw materials or intermediate products, opening up or maintaining sales markets (capital flight). Protection against political risks through guarantees for capital investments abroad (investment protection agreement). Contrary to popular belief, there is a direct investment motive for undermining environmental regulations no empirical evidence. The eclectic paradigm offers a comprehensive explanation.

See also international direct investment, joint venture, intergovernmental community program.

Effects

1. Possible positive effects for the recipient country (especially in developing countries):
(1) Mitigation of the shortage of capital and thereby an increase in productivity and employment of other production factors;
(2) Accelerated growth through an increase in macroeconomic investment (external investment finance);
(3) Relief of the balance of payments;
(4) Contribution to the diversification of the production structure;
(5) positive employment effects;
(6) technology transfer;
(7) Induction of investment or production activities in upstream and downstream production stages.

2. Possible negative effects for the recipient country (especially in developing countries):
(1) displacement of domestic producers;
(2) Welfare losses or income transfer in favor of investors through state perks (e.g. granting of infrastructural services free of charge, "protective pension" in the way of shielding the market through import duties or subsidized inputs and discounted credits).

Reporting requirement

The statistics on German direct investments are kept by the Deutsche Bundesbank. (Control of the expenditure of the Federal Statistical Office, Wiesbaden, as well as EUROSTAT). It is based on inventory reports from domestic companies and private individuals on the "assets of residents in foreign economic areas" (German direct investment abroad) and on the "assets of non-residents in the economic area" (foreign direct investments in Germany). The scope of the obligation to report capital exports outside the German economic area results from the provisions of the Foreign Trade Ordinance (AWV) (ยงยง 64-66 AWV). Violations of these reporting regulations constitute administrative offenses according to Section 81 AWV.