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A. Do you think there is a need for multilateral
investment agreement? Give reasons.
B. Distinguish between Foreign Direct Investment and
Portfolio Investment.
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Answer Posted / ashish singh
Portfolio Investment represents passive holdings of
securities such as foreign stocks, bonds, or other
financial assets, none of which entails active management
or control of the securities' issuer by the investor; where
such control exists, it is known as foreign direct
investment. Generally, this means the investor holds less
than 10% of the total shares or less than the amount needed
to hold the majority vote.
Some examples of portfolio investment are:
purchase of shares in a foreign company.
purchase of bonds issued by a foreign government.
acquisition of assets in a foreign country.
Factors affecting international portfolio investment:
tax rates on interest or dividends (investors will normally
prefer countries where the tax rates are relatively low)
interest rates (money tends to flow to countries with high
interest rates)
exchange rates (foreign investors may be attracted if the
local currency is expected to strengthen)
Portfolio investment is part of the capital account on the
balance of payments statistics
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