Foreign Investment Flashcards
1
Q
characteristics of portfolio investment
A
- Ownership of less than 10% of the Asset
- Consists of equity (shares) and debt (borrowing) securities.
- Assumes the owner of shares have no say in the running of the business
- It’s a hands off or passive investment of securities in a portfolio
- Intended for financial gain only
2
Q
characteristics of Direct equity investment
A
- Ownership of greater than 10% of the asset
* Consists of equity (shares) and debt (borrowing) securities.
3
Q
characteristics of Debt
A
- Private
- Public (18.6% of GDP)
- Public and Private is more than $1 trillion
4
Q
Why are foreign investors interested in investing in Australia
A
- Consistent econ growth
- Highly skilled workforce
- Strategic location
- Strong governance
- Good infrastructure
- Business friendly environment
5
Q
Advantages of FDI
A
- Needed to stay internationally competitive
- Allows greater specialization
- FDI is very stable
- Raises living standards
- Multiplier process
- Improve skill base of labour
- Promotes exports
- Tax revenue
- Transfer of knowledge and better management
6
Q
Disadvantages of FDI
A
- Transfer pricing
- Monopoly, loss of control and ownership
- Dividends and profit repatriation
- Loss of tax revenue
7
Q
Benefits of Foreign Debt:
A
- Expand industries
- Specialisation
- DSR has declined
8
Q
Costs of foreign debt
A
- Credit rating Drop
- Interest repayments
- Depreciation revalues debt
- Vulnerable to external shock
