Module 4: Relationships, Foreign Investment, and Trade (

Question 1

Define Portfolio Investment

Answer 1

Act of investing in a company’s stocks, bonds, or assets, but not to control or direct the firm’s operations or management.

Typically, investors in this category are looking for a financial rate of return, and to diversifying investment risk through multiple markets

Question 2

Define Foreign Direct Investment (FDI)

Answer 2

An investment in or the acquisition of foreign assets with the intent to control and mange them.

Question 3

What are the reasons that governments promote FDI

hint: Benefits of FDI

Answer 3

Economic Growth
Increased employment & Reduces poverty
Improve human capital development - Tax incentives 
New Technologies
Increase tax revenue

Question 4

How does the government restricts the FDI

Answer 4

Using Tax rates & Sanctions
Owner Restrictions - governments can specify ownership if they want to keep the citizens in control of local markets/ industries

Question 5

How does the government Encourage FDI

Answer 5

Financial incentives

Infrastructure