最近，全球的商业环境已经经历了一个激增的外国直接投资（外国直接投资），特别是在新兴经济体。选择你所选择的一个新兴经济体，利用文献中引用的各种论据，批判性地评价外国直接投资对这个国家的影响。（10分）
与独立的1947后，印度政府决定采取社会主义制度即决定成为中央计划经济。在中央计划经济，顾名思义，政府已经控制了生产的因素，并利用这些根据一些预先决定的计划。此外，私营部门起着很少或根本没有作用。它在国家经济发展中的作用是由政府决定的。俄罗斯是中央计划或社会主义经济的一个例子。
在独立的时候，有一个社会主义经济的想法被认为有很大的优点。政府将控制所有生产要素能够分配这个国家的财富和资源，公平的人民中间，从而避免财富集中。然而，这个计划失败了，因为政府不能进行经济活动的方式，他们已计划。从世界银行的贷款开始增加，印度的国际收支状况开始变得越来越不利。当印度有足够的平衡，购买资源为1个月，在1991达到一个高峰。在这个时候，财政部长曼莫汉·辛格先生，决定引入该国的经济结构的一些变化，以打击印度经济所面临的挑战。他宣布印度是一个混合经济，其中公共和私营部门并存。此外，他还介绍了Liberalization的3个黄金法则，私有化，全球化。
Recently the global business environment has been experiencing a surge in Foreign Direct Investment (FDI), in particular in the emerging economies. Select an emerging economy of your choice; critically evaluate the impact of inward FDI on this country using the various arguments cited in the literature. (10 marks)
Ans - After independence in 1947, the Indian government decided to adopt the socialist regime i.e. it decided to become a centrally planned economy. In a centrally planned economy, as the name suggests, the government has control over the factors of production and makes use of these according to some pre - decided plan. Also, the private sector plays little or no role. Its role in the development of the country's economy is decided by the government. Russia is an example of a centrally planned or socialist economy.
At the time of independence, the idea of having a socialist economy was thought to have great merit. The government would control all factors of production and be able to distribute the wealth and resources of the country equitably among the people, thus avoiding concentration of wealth. However, this plan failed because the government could not carry out the economic activities in the manner that they had been planned. The loan from the World Bank started increasing, India's Balance of Payments position started becoming more and more unfavorable. A peak was reached in 1991 when India had just about enough balance to buy resources for 1 month. At this time, the Finance Minister Mr. Manmohan Singh, decided to introduce some changes in the economic structure of the country so as to combat the challenges faced by the Indian economy. He declared India to be a mixed economy wherein both public and private sectors coexist with each other. Also, he introduced the 3 golden rules of - Liberalization, Privatization, Globalization.
Privatization involved opening up of several key industries to the private sector also. The no. of industries in which the private sector could not operate was reduced to 5.
Liberalization involved the removal of unnecessary restrictions that had been placed on the Indian companies e.g. Indian companies got automatic approval from the government for foreign technology transfer agreements.
Globalization refers to integrating of the country's economy with the world economy, thus making the world one huge market such that every country could be a market for another country's products or the source of raw materials for another country's products.
It was Liberalization that opened the path to FDI for the country. FDI, also known as Foreign Direct Investment, involves the injection of foreign funds into an enterprise. The enterprise should have its headquarters or its country of origin must be different than that of the investing country. FDI can also be defined as the investment of foreign assets into domestic equipment, organizations and structures. However, investment is domestic stock market by foreign investor is not considered to be a part of FDI.
In contrast to the investments made in the equity of a company, FDI is thought to be very useful because of its durability. Unlike in the former case wherein investor can stop investing at the first sign of an adverse situation, in FDI, investment is constant irrespective of whether situation is adverse or favorable.
When investors invest a certain amount of money in the domestic company, they get some shares as proof of their investment. If the investors get ownership of 10 % or more of the ordinary shares of the company, they are granted management rights and voting rights in the company.
Foreign direct investment (FDI) is defined as an investment involving a long-term relationship and reflecting a lasting interest and control by a resident entity in one economy (foreign direct investor or parent enterprise) in an enterprise resident in an economy other than that of the foreign direct investor (FDI enterprise or affiliate enterprise or foreign affiliate). FDI implies that the investor exerts a significant degree of influence on the management of the enterprise resident in the other economy. Such investment involves both the initial transaction between the two entities and all subsequent transactions between them and among foreign affiliates, both incorporated and unincorporated.
Depending on the direction of flow of money, FDI can be classified as follows -
a) Inward FDI - This involves the investment of foreign capital in domestic / local resources. The investor and the company being invested in should have different countries of origin. The factors responsible for growth of inward FDI are grants, low interest rates and tax breaks.
b) Outward FDI - This involves the investment of domestic capital in foreign resources. In this, government gives the backing against all / any associated risk. This is also known as Direct Investment Abroad.
Routes of Inward FDI
Foreign Direct Investment can take the following given routes to enter the economy -
a) Automatic Route
b) Foreign Investment Promotion Board (FIPB) Route
c) Cabinet Committee of Foreign Investment (CCFI) Route
Inward FDI in India : A Sector - wise Guide
1. FDI In Hotel and Tourism Industry
Here, the term 'hotel" includes beach resorts, restaurants and other tourist complexes that cater to tourists and provide food facilities and accommodation to them. Tourist transport operating agencies, tour operating agencies, units providing tourists facilities for adventure, wild life and cultural experience, water, air and surface transport facilities to tourists, sports, entertainment, amusement, leisure, health units, seminar and convention units are all a part of the tourism related industry.
On the automatic route, 100% FDI is permissible in the hotel and tourism industry in India.
In case of Foreign Technology Agreements, approval is granted automatically if the following conditions are satisfied :-
0 - 3 % of the total capital cost of project must be proposed to be used for payment of consultancy services and technical services. This includes the fees for design, supervision, architects, etc.
0 - 3 % of the net turnover of the project must be used for payment of publicity or marketing support fee and franchising.
0 - 10 % of the gross operating profit must be used for payment of management fee. The incentive fee is included in the management fee.
2. FDI In Banking (Private Sector) : Non - Banking Financial Companies
On the automatic routes, FDI up to 49 % is allowed from all sources. This can vary as per the guidelines issued by the Reserve Bank of India from time to time.
NRI / OCB / FDI investments are allowed in the following Non - Banking Financial Companies activities :-
Custodial Services
Credit Rating Agencies
Factoring
Underwriting
Micro Credit
Merchant Banking
Rural Banking
Stock Broking
Portfolio Management Services
Credit Reference Agencies
Investment Advisory Services
Venture Capital
Foreign Exchange Brokering
Financial Consultancy
Credit Card Business
Housing Finance
Money Changing Business
Leasing and Finance
Asset Management
Minimum capitalization standards with regards to percentage of FDI for fund - based Non - Banking Financial Companies are as follows :-
Up to 51 %, US $ 0.5 million has to be paid up front.
51 % - 75 %, US $ 5 million must be paid up front.
75 % to 100 %, US $ 7.5 million must be paid up front and US $ 43.5 million must be paid within a period of 2 years. In this condition, foreign investors can set up 100 % operating subsidiaries. Also, the condition of disinvesting 25 % of the equity to Indian entities is not applicable here.
Minimum capitalization standard with regards to FDI for non - fund based Non - Banking Financial Companies is US $ 0.5 million.
Joint Venture operating Non - Banking Financial Companies having up to 75 % (78 % included) foreign investment are allowed to set up subsidiaries that will undertake other activities of Non - Banking Financial Companies. However, this holds true only if the subsidiaries comply with the guidelines pertaining to the applicable minimum capitalization standards (as mentioned above).
The decision to put FDI in the Non - Banking Financial Companies sector on automatic route is taken as per the guidelines issued by the Reserve Bank of India.
3. FDI In Insurance
The upper limit of FDI allowed in the insurance sector is 26 %. However, this is subject to obtaining of license from the IRDA (Insurance Regulatory and Development Authority).
4. FDI In Tele - communication
In basic, value added, cellular services and global mobile personal communications by satellite, 49 % FDI is allowed as per the security and licensing requirements and adherence by the investing companies and the firms in which investing is being done, to the conditions for licensing for foreign equity cap and lock.
In relation to Internet Services Providers with end to end bandwidth, gateways and radio paging, FDI up to 74 % is allowed. Also, the companies having FDI above 49 % are subject to the security and licensing requirements given by the government.
In regards to manufacturing activities, no equity cap is applicable.
Subject to some conditions, for the following activities in the telecom sector, up to 100 % FDI is permitted -
Internet Service Providers not providing gateways (applicable for submarine cables and satellite)
Infrastructure Providers who are giving dark fiber of IP Category 1
E - mail
Voice Mail
The conditions for 100 % FDI in the above activities are as follows -
All such companies, if listed in any other part of the world (than India) have to divest 26 % of their total equity in favor of the Indian public within a period of 5 years.
All the above mentioned services would be subject to security and licensing requirements as and when required.
Depending on the case, the proposals for 100 % FDI will be considered by the FIFB.
5. FDI In Trading Companies
Subject to the condition that trading consists mainly of export activities carried out by a trading house, export house, star trading house or super trading house, the upper limit for FDI under the automatic route will be 51 %. However, under the FIPB route :-
In case of the following activities, 100 % FDI is allowed -
Cash and carry wholesale trading
Exports
Import of goods and services on the condition that a minimum of 75 % of the imported goods and services will be used for manufacture of other goods and services or in case of sale, these goods and services will be sold to other firms belonging to the same industry. These goods and services are not meant for use by a third party i.e. they are not meant for distribution or transfer or sales.
Bulk imports with export / ex - bonded warehouse sales
E - commerce activities. All companies conducting e - commerce activities, if listed in any other part of the world (than India) have to divest 26 % of their total equity in favor of the Indian public within a period of 5 years. Also, these companies can only participate in business to business e - commerce activities. They cannot participate in retail trading.
6. FDI In Power Sector
In relation to projects such as generation of electricity, its distribution and transmission, the upper limit in FDI is 100 %. However, this excludes generation of electricity by atomic reactor power plants. The quantum of FDI allowed and the project cost in this sector are unlimited.
7. FDI In Pharmaceutical Sector
For the manufacture of drugs and pharmaceuticals, on the automatic route, the upper limit for FDI is 100 %. However, the manufacture of drugs and pharmaceuticals should not attract compulsory licensing by the government or involve the use of formulations targeted at a specific tissue / cell. It should also not involve the use of recombinant DNA technology. All proposals for manufacture of drugs and pharmaceuticals by using the above mentioned practices will have to get prior approval from the government.
8. FDI In Transport Sector (Highways, Harbors, Roads and Ports)
In relation to projects involving the construction and maintenance of highways, roads, vehicular tunnels, harbors, vehicular bridges and ports, on the automatic route, the upper limit for FDI is 100 %.
9. FDI In Pollution Management and Control
In the manufacture of equipment used for controlling pollution and in the consultancy for integration of pollution control systems, on the automatic route, the upper limit of FDI is 100 %.
10. FDI in Business Process Outsourcing and Call Centers
The upper limit for FDI in this sector is 100 %. However, this is applicable only if certain conditions are satisfied by the company that is being invested in and the investing company.
11. FDI In Key Sectors of India
India has liberalized FDI in its key sectors by opening up credit information services, aircraft maintenance operations and commodity exchanges to FDI. The upper limit for FDI in commodity exchanges is 26 %. The upper limit for FDI in Public Sector Units refineries has been increased from 26 % to 49 %. Also, companies no longer have to disinvest within a period of 5 years. Also, in the Civil Aviation sector, on the automatic route, the upper limit for FDI is 74 %. This is applicable for cargo airlines, ground handling activities and scheduled airlines. In aircraft repair and maintenance operations, the upper limit for FDI is 100 %. Also, in the mining of titanium, the upper limit of FDI is 100 %.
Advantages of FDI to India -
Increases Competition - With inflow of FDI, new firms enter the market and / or existing firms become more proficient in producing the product (joint ventures or collaborations) due to access to greater resources and advanced technology. With increase in the number of companies, there is more competition in the industry. Eventually, this increased competition benefits the consumer only.
Better Quality - With increase in competition, each firm within the particular industry endeavours to produce a better quality product than its competitors so as to maximize its sales and maintain its profitability. Thus, the consumer has access to products of higher quality.
Reduced Cost - The main objective of every firm is to maximize its profits. With increase in the competition, the firms try to find a way to produce optimum quality product at the least possible cost. Decrease in the cost of production leads to reduction in the selling price of product. Thus, the consumer has to pay less and also get a product of higher quality.
More Choice - With increase in the number of firms in the industry, there is a greater number of similar products*of the same industry) available in the market. Thus, consumer has a wide variety of products to choose from.
Employment - With transfer of FDI and the establishment of new firms, there is creation of job opportunities for the public as all firms require labour. Thus, the level of unemployment is reduced. Also, MNCs usually give higher wages to workers than the Indian companies.
Capital and Technology Transfer - There is inflow of money and advanced technology into the economy of India. The inflow of money contributes to the national income of the country. The inflow of advanced technology helps in reducing the cost of production and improving quality of the product. Thus, consumer gets a higher quality product at a lower cost.
Economic and Social Development - With inflow of capital and technology leading to higher national income, reduced cost and better quality of products, reduction in level of unemployment, there is increase in the rate of economic development of the country. The Gross Domestic Product and the national income are both positively affected. Also, FDI helps in establishment of better infrastructure in the country.
Disadvantages of FDI to India -
Exploitation - If 100 % FDI is allowed in all sectors of the Indian economy, the economy may become totally dependent on the foreign country(s) for satisfaction of its needs and wants. This can result in a form of modern - day colonialism wherein the resources of the host country (India) are exploited by the investing country and used for its own profit and not for the host country's benefit.
Jeapordises Balance of payments of India - Reduction in cost of production, reduced prices, increase in national income all contribute positively to the balance of payments position of the economy. But when the investing country achieves the break even point (it recovers its initial investment), the investing country starts earning profits. The benefits gained by the investing country may be significantly greater than those gained by the host country (India). This can jeopardise the balance of payments position (make it unfavourable) of the host country.
Generates Negative Externalities in Labour Market - All firms in a particular industry have the common objective of maximising their profits. The most direct approach used for achieving this is by cost reduction It is true that MNCs also give higher wages to workers. This is done by giving wage premiums to the workers. This improves the consumption power of the workers but also has the detrimental ability of disrupting the local unemployment market. When the price of labour increases, wage premiums decrease. Thus, a distortion is created and there is disequilibrium in the labour market. Job matching becomes inefficient, leading to an increase in the level of unemployment.
Threat of Monopoly - The multi national companies usually enter the Indian market with advanced technology and hence, supply better quality of products at a lower price. However, there is the threat of monopolization by these firms i.e. when all their competition has been removed from the market, they can increase the prices as they wish and consumer will have no choice but to buy the product at the increased prices as there will not be any other supplier of the product.
Fear of Total Dependence - The multi national companies, by increasing the competition, can also lead to the closing of the Indian companies. This leads to a decrease in the Gross Domestic Product and the National Income of the country. India may become totally dependent on foreign countries for its income and sustenance.