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Roll No: 3028




CERTIFICATE To whomsoever it may concern

This is to certify that the work entered in this journal is the work of PATANKAR NIMISH AJIT T.Y.F.M , have successfully completed a

project report on the Obstacles to International Investment topic terms of the year 2011-12 in the college as laid down by the college authority

_____________ (Professor/Guide) Prof. Bhavana Parab

______________ (BFM Co- ordinator) Prof. Jennie prajith

Date: __________

_______________ (External Examiner)



COMMERCE & SCIENCE, hereby declare that I have completed the project report on Obstacles to International Investment in the academic year 2011-12.The information submitted by me is true & original to the best of my knowledge.




I would like to thank my college that is Pillais College of Arts, Commerce and Science, New Panvel where I have gained plenty of knowledge which helped me in turning this project a success. Apart from my efforts, the success of any project depends largely on the encouragement and guidelines of many others. I take this opportunity to express my gratitude to the people who have been instrumental in the successful completion of this project. I would especially thank my Professor Prof. Bhavana Parab and the T.Y.B.Com F/M Coordinator Prof. Jennie Prajith for giving her valuable guidance in the design and the changes that were required to be made for the proper implementation of the project. Without those efforts this project would not have been successful. I would also extend my thanks to our Vice Principal Mr. A.N.Kutty for his support and facilities provided to me for the same. Lastly, I would like to thank all those who directly and indirectly helped me in completion of this project.


Serial No. CONTENT NO No.
1 1.1 1.2 2 2.1 2.2 2.3 2.4 2.5 3 3.1 3.2 3.3 3.4 3.5 3.6 3.7 3.8 3.9 4 5 6 7 Executive summary Introduction Objectives of the study Research Methodology Profile of Institution Establishment History Corporate Affairs Global Equity Funds Risk Management Conceptual Framework Concept of International Investment International Diversification Barriers to International Investment Foreign Exchange Risk Information barriers Regulatory barriers Political risk Taxation system Double Taxation Avoidance Agreement (DTAA) Collection & analysis of data Interpretation of data Conclusion Suggestions & Recommendations Appendices Bibliography

Page No.


International investment is a modern concept of investment. International investment refers to invest money in foreign market. It is a vast concept of investment. International investment can prove to be profitable in long run there are quit few risks in which investors considers while investing abroad. Such as difference between domestic market and international market which are operate in two different places & time. There are also important factors which can make its impact on foreign investment such as, Investor psychology & High costs. Along with risk there are two major barriers which make its impact on International investment. In foreign exchange, capital invested and returns thereof are in one currency. The value creation, however, using that capital is in different currency. Hence either the issuing company or the investors prone to make losses on account of forex risk. In taxation system there is risk occurred by differences in tax laws in various fetches different returns to the investors of different residential status. On the other hand there are some information barriers such as Language differences, Different accounting standards, Different methods and High cost of sources of information in companies in some markets. These all barriers create risk & obstacles towards the International investment. The asymmetric information between domestic investors and foreign investors with respect to investment allocation leads to moral hazard on thus generate an inadequate amount of borrowings. Also there are regulatory & political barriers which affect the Foreign Direct Investment. Some countries impose restrictions on foreign investment to protect their domestic industry and money markets. Legal and Regulatory barriers can hinder the flow of goods and services and the movement of capital & people. Political risk includes political instability, corruption, governance & control, antiglobalization movements, environmental concerns and global terrorism etc. For the purpose of eliminate the obstacles there are several measures taken by governments of various countries. e.g. DTAA (Double Taxation Avoidance Agreement), Changes in Tariffs & Subsidies, improving foreign affairs & relations. In this project I have included both primary and secondary data.


International investment is a modern concept of investment. International investing is a type of investment that involves purchasing securities that originate in other countries. This type of investment is popular because it can provide diversification and opportunities for superior growth. It is a vast concept of investment. International investment can prove to be profitable in long run there are quit few risks in which investors considers while investing abroad. Such as difference between domestic market and international market which are operate in two different places & time. There is also important factors which can make its impact on foreign investment such as, Investor psychology & Higher costs. It is generally believed that there is a difference between local financial market and international market. Actually it is beneficial to the investor investing abroad. However, recent trends show that these differences are increasing day by day. Moreover, these differences seem to increase during the period of down markets and decrease

during period of upward markets. This is rather troubling since it would beneficial for investor if during a slump in domestic markets performed differently. Investing in foreign markets can involve higher costs for the investor due to higher transactions costs for commissions, market impact cost etc. and higher portfolio management cost because of greater cost of research and so on. This can have an adverse bearing on the on investors returns. One should be vary of investment taxes and other unexpected taxes in foreign countries. Even currency fluctuations can sometimes prove to be expensive for the international investor. In any investment the investors psychology plays an important role. In international investment if an investor can hold on to their investments for a longish period instead of locking on to their losses by selling early, they will benefit from the discipline. Traditionally most investors believe that international markets are not volatile, but one is likely to incur losses. It is true that volatility does exit, but it can be mitigated


through diversification in international mutual funds. Over cautious investors, when they see a loss in an international investment, sell it sooner than they would sell an investment with similar risk level in a domestic market. Along with risks investors have been facing many other obstacles in foreign investment. Such obstacles are Foreign exchange risk, Information barriers, Regulatory barriers, Differences in taxation system for different residential status, Different accounting standards, Political risk, Capital control & other both economic factor (micro & macro). These all barriers make their impact on international investment by their own way.


1.1 Objectives of the Study

1) To understand the concept of International Investment. 2) To study about sources of International Investment 3) To understand the barriers in International Investment in India. 4) To evaluate the measure for reducing the barriers in International Investment in India. 5) To find out the effect of International Investment on Indian economy


1.2 Research Methodology

Primary data:
Primary data is a term for data collected on source which has not been subjected to processing or any other manipulation, it is known as raw data. In this project primary data have collected by survey method which questionnaire. Through survey method we can analyze peoples opinion, suggestions & preferences.

Secondary data:
Secondary data is the data collected by someone other than the user. Secondary data includes newspapers, books, etc. There are various sources by which we can collect secondary data. Secondary data includes information in detail. Along with it includes many features, functions, concept & other relative information. In this project secondary data have collected by books, websites & newspaper.

Research methodology

Primary data Surveys

Secondary data Books Global Business V.A.Avdhani. Global Capital Market Dipak Abhyankar.

Websites :- www. Newspaper:- Mint

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Chapter No.- 2

Profile of the Institution

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2.1 Establishment
The Goldman Sachs Group, Inc. (NYSE: GS) is an American multinational bulge bracket investment banking and securities firm that engages in global investment banking, securities, investment management, and other financial services primarily with institutional clients. Goldman Sachs was founded in 1869 by Marcus Goldman. and is headquartered at 200 West Street in the Lower Manhattan area of New York City, with additional offices in major international financial centers. The firm provides mergers and acquisitions advice, underwriting services, asset management, and prime brokerage to its clients, which include corporations, governments and individuals. The firm also engages in proprietary trading and private equity deals, and is a primary dealer in the United States Treasury security market. Former employees include Robert Rubin and Henry Paulson who served as United States Secretary of the Treasury under Presidents Bill Clinton and George W. Bush, respectively, as well as Mark Carney, the governor of the Bank of Canada since 2008.

Key people Lloyd Blankfein (Chairman & CEO)

Gary Cohn(President & COO)

David Viniar(Executive VP & CFO)

Goldman Sachs has frequently performed above the market despite worsening economic conditions. For the fiscal year 2010 ended in December, Goldman Sachs reported a total revenue of $39B and a net income $8.35B.

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2.2 History

Goldman Sachs Tower, at 30 Hudson Street, in Jersey City

Goldman Sachs Headquarters, at 200 West Street, in Manhattan.

18691930 Goldman Sachs was founded in New York in 1869 by the German-born Marcus Goldman. In 1882, Goldman's son-in-law Samuel Sachs joined the firm. In 1885, Goldman took his son Henry and his son-in-law Ludwig Dreyfuss into the business and the firm adopted its present name, Goldman Sachs & Co. The company made a name for it pioneering the use of commercial paper for entrepreneurs and was invited to join the New York Stock Exchange (NYSE) in 1896.

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In the early 20th century, Goldman was a player in establishing the initial public offering (IPO) market. It managed one of the largest IPOs to date, that of Sears, Roebuck and Company in 1906. On December 4, 1928, it launched the Goldman Sachs Trading Corp. a closed-end fund with characteristics similar to that of a Ponzi scheme. The fund failed as a result of the Stock Market Crash of 1929, hurting the firm's reputation for several years afterward. Of this case and others like Blue Ridge Corporation and Shenandoah Corporation John Kenneth Galbraith wrote: The Autumn of 1929 was, perhaps, the first occasion when men succeeded on a large scale in swindling themselves. 19301980 In 1930, Sidney Weinberg assumed the role of senior partner and shifted Goldman's focus away from trading and towards investment banking. It was Weinberg's actions that helped to restore some of Goldman's tarnished reputation. On the back of Weinberg, Goldman was lead advisor on the Ford Motor Company's IPO in 1956, which at the time was a major coup on Wall Street. Under Weinberg's reign the firm also started an investment research division and a municipal bond department. It also was at this time that the firm became an early innovator in risk arbitrage. Gus Levy joined the firm in the 1950s as a securities trader, which started a trend at Goldman where there would be two powers generally vying for supremacy, one from investment banking and one from securities trading. For most of the 1950s and 1960s, this would be Weinberg and Levy. Levy was a pioneer in block trading and the firm established this trend under his guidance. Due to Weinberg's heavy influence at the firm, it formed an investment banking division in 1956 in an attempt to spread around influence and not focus it all on Weinberg. In 1969, Levy took over as Senior Partner from Weinberg, and built Goldman's trading franchise once again. It is Levy who is credited with Goldman's famous philosophy of being "long-term greedy", which implied that as long as money is made over the long term trading losses in the short term were not to be worried about. At the same time, partners reinvested almost all of their earnings in the firm, so the focus was always on the future. That same year, Weinberg retired from the firm.
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Another financial crisis for the firm occurred in 1970, when the Penn Central Transportation Company went bankrupt with over $80 million in commercial paper outstanding, most of it issued by Goldman Sachs. The bankruptcy was large, and the resulting lawsuits threatened the partnership capital and life of the firm. It was this bankruptcy that resulted in credit ratings being created for every issuer of commercial paper today by several credit rating services. During the 1970s, the firm also expanded in several ways. Under the direction of Senior Partner Stanley R. Miller, it opened its first international office in London in 1970, and created a private wealth division along with a fixed income division in 1972. It also pioneered the "white knight" strategy in 1974 during its attempts to defend Electric Storage Battery against a hostile takeover bid from International Nickel and Goldman's rival Morgan Stanley. This action would boost the firm's reputation as an investment advisor because it pledged to no longer participate in hostile takeovers. John L. Weinberg (the son of Sidney Weinberg), and John C. Whitehead assumed roles of co-senior partners in 1976, once again emphasizing the co-leadership at the firm. One of their initiatives was the establishment of the 14 business principles that are still used to this day. 19801999 On November 16, 1981, the firm made a move by acquiring J. Aron& Company, a commodities trading firm which merged with the Fixed Income division to become known as Fixed Income, Currencies, and Commodities. J. Aron was a player in the coffee and gold markets, and the current CEO of Goldman, Lloyd Blankfein, joined the firm as a result of this merger. In 1985 it underwrote the public offering of the Real Estate Investment Trust that owned Rockefeller Center, then the largest REIT offering in history. In accordance with the beginning of the dissolution of the Soviet Union, the firm also became involved in facilitating the global privatization movement by advising companies that were spinning off from their parent governments. In 1986, the firm formed Goldman Sachs Asset Management, which manages the majority of its mutual funds and hedge funds today. In the same year, the firm also
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underwrote the IPO of Microsoft, advised General Electric on its acquisition of RCA and joined the London and Tokyo stock exchanges. 1986 also was the year when Goldman became the first United States bank to rank in the top 10 of mergers and acquisitions in the United Kingdom. During the 1980s the firm became the first bank to distribute its investment research electronically and created the first public offering of original issue deep-discount bond. Robert Rubin and Stephen Friedman assumed the Co-Senior Partnership in 1990 and pledged to focus on globalization of the firm and strengthening the Merger & Acquisition and Trading business lines. During their reign, the firm introduced paperless trading to the New York Stock Exchange and lead-managed the first-ever global debt offering by a U.S. corporation. It also launched the Goldman Sachs Commodity Index (GSCI) and opened a Beijing office in 1994. It was this same year that Jon Corzine assumed leadership of the firm following the departure of Rubin and Friedman. Another momentous event in Goldman's history was the Mexican bailout of 1995. Rubin drew criticism in Congress for using a Treasury Department account under his personal control to distribute $20 billion to bail out Mexican bonds, of which Goldman was a key holder. On November 22, 1994, the Mexican Bolsa stock market had admitted Goldman Sachs and one other firm to operate on that market. The 1994 economic crisis in Mexico threatened to wipe out the value of Mexico's bonds held by Goldman Sachs. The firm joined David Rockefeller and partners in a 5050 joint ownership of Rockefeller Center during 1994, but later sold the shares to Tishman Speyer in 2000. In 1996, Goldman was lead underwriter of the Yahoo! IPO and in 1998 it was global coordinator of the NTT DoCoMo IPO. In 1999, Henry Paulson took over as Senior Partner.

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Since 1999 One of the largest events in the firm's history was its own IPO in 1999. The decision to go public was one that the partners debated for decades. In the end, Goldman decided to offer only a small portion of the company to the public, with some 48% still held by the partnership pool. 22% of the company was held by non-partner employees, and 18% was held by retired Goldman partners and two longtime investors, Sumitomo Bank Ltd. and Hawaii's Kamehameha Activities Assn (the investing arm of Kamehameha Schools). This left approximately 12% of the company as being held by the public. With the firm's 1999 IPO, Paulson became Chairman and Chief Executive Officer of the firm. As of 2009, after further stock offerings to the public, Goldman is 67% owned by institutions (such as pension funds and other banks). In 1999, Goldman acquired Hull Trading Company, one of the world's premier market-making firms, for $531 million. More recently, the firm has been busy both in investment banking and in trading activities. It purchased Spear, Leeds, & Kellogg, one of the largest specialist firms on the New York Stock Exchange, for $6.3 billion in September 2000. It also advised on a debt offering for the Government of China and the first electronic offering for the World Bank. In 2003 it took a 45% stake in a joint venture with JB Were, the Australian investment bank. In 2009 The Private Wealth Management arm of JB Were was sold into a joint venture with National Australia Bank. Goldman opened a full-service broker-dealer in Brazil in 2007, after having set up an investment banking office in 1996. It expanded its investments in companies to include Burger King, McJunkin Corporation, and in January 2007, Alliance Atlantis alongside CanWest Global Communications to own sole broadcast rights to the all three CSI series. The firm is also heavily involved in energy trading, including the oil speculation market, on both a principal and agent basis. In May 2006, Paulson left the firm to serve as U.S. Treasury Secretary, and Lloyd C. Blankfein was promoted to Chairman and Chief Executive Officer. Former Goldman employees have headed the New York Stock Exchange, the World Bank, the U.S. Treasury Department, the White House staff, and firms such as Citigroup and Merrill Lynch.
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2.3 Corporate affairs

As of 2009, Goldman Sachs employed 31,701 people worldwide In 2006, the firm reported earnings of US$9.34 billion and record earnings per share of $19.69. It was reported that the average total compensation per employee in 2006 was US$622,000. However, this number represents the arithmetic mean of total compensation and is highly skewed upwards as several hundred of the top recipients command the majority of the Bonus Pools, leaving the median that most employees receive well below this number. In Business Week's recent release of the Best Places to Launch a Career 2008, Goldman Sachs was ranked No.4 out of 119 total companies on the list. The current Chief Executive Officer is Lloyd C. Blankfein. The company ranks No.1 in Annual Net Income when compared with 86 peers in the Investment Services sector. Blankfein received a $67.9 million bonus in his first year. He chose to receive "some" cash unlike his predecessor, Paulson, who chose to take his bonus entirely in company stock. Goldman Sachs divided into three businesses units: Investment banking Investment banking is divided into two divisions and includes Financial Advisory (mergers and acquisitions, investitures, corporate defense activities, restructuring and spin-offs) and Underwriting (public offerings and private placements of equity, equityrelated and debt instruments). Goldman Sachs is one of the leading M&A advisory firms, often topping the league tables in terms of transaction size. The firm gained a reputation as a white knight in the mergers and acquisitions sector by advising clients on how to avoid hostile takeovers, moves generally viewed as unfriendly to shareholders of targeted companies. Goldman Sachs, for a long time during the 1980s, was the only major investment bank with a strict policy against helping to initiate a hostile takeover, which increased the firm's reputation immensely among sitting management teams at the time. The investment banking segment accounts for around 17 percent of Goldman Sachs' revenues.

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The firm has also been involved in both advising and brokering deals to privatize major highways by selling them to foreign investors. In addition to advising 4 state and local governments on privatization projects, including Indiana, Texas, and Chicago. Trading & principal investments Trading and Principal Investments is the largest of the three segments, and is the company's profit center. The segment is divided into three divisions and includes Fixed Income, Currency and Commodities (trading in interest rate and credit products, mortgage-backed securities and loans, currencies and commodities, insurance-linked securities, structured and derivative products), Equities (trading in equities, equity-related products, equity derivatives, structured products and executing client trades in equities, options, and futures contracts on world markets), and Principal Investments (merchant banking investments and funds). This segment consists of the revenues and profit gained from the Bank's trading activities, both on behalf of its clients (known as flow trading) and for its own account (known as proprietary trading). Most trading done by Goldman is not speculative, but rather an attempt to profit from bid-ask spreads in the process of acting as a market maker. On average, around 68 percent of Goldman's revenues and profits are derived from trading. Upon its IPO, Goldman predicted that this segment would not grow as fast as its Investment Banking division and would be responsible for a shrinking proportion of earnings. The opposite has been true however, resulting in now-CEO Blankfein's appointment to President and Chief Operating Officer after John Thain's departure to run the NYSE and John L. Thornton's departure for an academic position in China. Asset management and securities services As the name suggests, the firm's Asset Management and Securities Services segment is divided into two components: Asset Management and Securities Services. The Asset Management division provides investment advisory and financial planning services and offers investment products (primarily through separately managed accounts and commingled vehicles) across all major asset classes to a diverse group of institutions and individuals worldwide. The unit primarily generates revenues in the form of management
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and incentive fees. The Securities Services division provides clearing, financing, custody, securities lending, and reporting services to institutional clients, including hedge funds, mutual funds, and pension funds. The division generates revenues primarily in the form of interest rate spreads or fees. In 2009, the Goldman Sachs Asset Management hedge fund was the 9th largest in the United States, with $20.58 billion under management. This was down from $32.5 billion in 2007, after client redemptions and weaker investment performance. GS Capital Partners GS Capital Partners is the private equity arm of Goldman Sachs. It has invested over $17 billion in the 20 years from 1986 to 2006. One of the most prominent funds is the GS Capital Partners V fund, which comprises over $8.5 billion of equity.[54] On April 23, 2007, Goldman closed GS Capital Partners VI with $20 billion in committed capital, $11 billion from qualified institutional and high net worth clients and $9 billion from the firm and its employees. GS Capital Partners VI is the current primary investment vehicle for Goldman Sachs to make large, privately negotiated equity investments.

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2.4 GLOBAL EQUITY FUNDS 1) Goldman Sachs N-11 Equity Fund N-11 countries have large, growing and young populations, compared to the global average. The dramatic expansion of the N-11 middle-and high-income classes will be a key driving force behind the rise in consumer consumption. The growth of the N11countries could be one of the largest developments in the world economy. These economies may experience rising productivity coupled with favorable demographics, and as a result experience a faster growth rate than the world average. The N-11 provides geographic diversification as well as exposure to diverse stages of economic development-ranging from more advanced growth economies to traditional emerging markets. This diversity combined with domestic consumption offers the potential for strong equity market performance.

COUNTRY ALLOCATION (%) COUNTRY Mexico South Korea Indonesia Turkey Nigeria Philippines Pakistan Bangladesh Vietnam Egypt South Africa Cash and cash equivalents Fund 24.0 23.0 15.8 15.1 4.5 4.0 3.4 2.7 2.6 1.7 1.6 1.6 Index 22.9 23.0 15.7 15.7 4.7 4.2 3.7 2.8 2.7 4.7 0.0 0.0

(*source- _n-11equityfund_101552_20110630_fc.pdf)

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2) Goldman Sachs Asia Equity Fund The fund primarily invests in the public equity markets of Asia. It primarily invests in the growth stocks of mid-cap companies. The fund employs a fundamental analysis with a bottom-up stock picking approach to make its investments. It benchmarks the performance of its portfolios against the MSCI All Country Asia Free ex-Japan Index (under hedged). The fund was formerly known as Goldman Sachs Asia Growth Fund. Goldman Sachs Asia Equity Fund was formed on July 08, 1994 and is domiciled in the United Kingdom.

TOP TEN COUNTRY WEIGHTS (%) COUNTRY China South Korea Taiwan Hong Kong India Singapore Malaysia Indonesia Thailand Philippines Fund 25.4 21.1 17.3 9.1 8.9 6.7 4.1 3.6 1.9 0.0 Index 24.7 20.7 15.6 11.0 10.7 6.9 4.4 3.6 2.4 0.8


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3) Goldman Sachs BRIC Fund The BRIC concept was first identified by Goldman, Sachs & Co. in 2001.In 2001, Goldman Sachs created and coined the term BRICBrazil, Russia, India and Chinato identify the world are fastest growing economies. A group of countries that will be next global leaders. Our latest forecasts illustrate their anticipated momentum as key drivers of global economic recovery, to potentially become four of the worlds top six economies by 2032. COUNTRY ALLOCATION (%) COUNTRY China Brazil India Russia Fund 36.9 33.2 15.0 13.8 Index 36.9 33.0 15.8 14.5


4) Goldman Sachs Concentrated International Equity Fund Goldman Sachs Concentrated International Equity Fund is an open-end fund incorporated in the USA. The Fund's objective is long-term capital appreciation. The Fund invests primarily in equity securities of companies that are organized outside the U.S. or whose securities are principally traded outside the U.S. TOP TEN COUNTRY WEIGHTS (%) COUNTRY Japan United Kingdom France Switzerland Australia Italy Germany Hong Kong Sweden Denmark

Fund 24.4 17.7 13.1 11.4 8.8 6.2 5.6 3.9 2.9 2.0

Index 20.0 21.3 10.5 8.4 8.6 2.8 9.0 2.7 3.1 1.1


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5) Goldman Sachs Strategic International Equity Fund The Fund offers a broadly diversified portfolio of companies from developed and emerging countries around the world. Goldman Sachs Strategic International Equity Fund is an open-end fund incorporated in the USA. The Fund's objective is long-term growth of capital. The Fund invests in the stocks of leading companies within developed and emerging countries around the world and outside the U.S.

TOP TEN COUNTRY WEIGHTS (%) COUNTRY Japan United Kingdom France Switzerland Australia Germany Italy Hong Kong Denmark Sweden Fund 23.7 20.4 11.6 9.7 9.1 6.2 5.3 3.1 2.6 2.5 Index 20.0 21.3 10.5 8.4 8.6 9.0 2.8 2.7 1.1 3.1

(*source _101274_20110630_fc.pdf)

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6) Goldman Sachs Emerging Markets Equity Fund The fund invests in the public equity markets across the global emerging markets. It invests in stocks of companies operating across diversified sectors. The fund typically invests in growth stocks of all market capitalization companies. It employs a fundamental analysis with a bottom-up stock picking approach to create its portfolio. The fund conducts in-house research to make its investments. This fund capitalize on the growth potential in emerging markets by identifying mis-priced stocks that represent alpha opportunities through intensive bottom-up, fundamental research.

TOP TEN COUNTRY WEIGHTS (%) COUNTRY China Brazil South Korea Taiwan Russia India South Africa Mexico Malaysia Indonesia Fund 18.7 17.0 14.7 12.1 9.2 7.9 6.0 4.6 3.1 2.7 Index 17.3 15.5 14.8 11.1 6.8 7.4 7.3 4.4 3.2 2.6

(*source 4_20110630_fc.pdf)

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7) Goldman Sachs International Small Cap Fund The fund invests in the public equity market across the globe excluding United States. It makes its investments in stocks of companies operating across diversified sectors. The fund primarily invests in stocks of small cap companies. It employs fundamental analysis and uses bottom-up stock selection approach to create its portfolio. The fund benchmarks the performance of its portfolio against the S&P/Citigroup EMI World ex-U.S. Index. It was formerly known as Goldman Sachs International Growth Opportunities Fund.

TOP TEN COUNTRY WEIGHTS (%) COUNTRY United Kingdom Japan Canada Germany France Australia South Korea Switzerland Italy Netherland Fund 18.3 16.8 10.9 8.5 7.4 6.2 5.1 4.1 3.9 3.3 Index 16.7 16.8 11.2 7.4 9.6 6.9 4.4 6.8 2.7 1.8

(*source 20110630_fc.pdf)

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2.5 Risk Management

Market Risk Management & Analysis measures, analyzes and controls the market risk of the firm globally responsibilities include: Playing a key role in the risk/reward decision making process of the Firm wide Risk Committee Measuring the losses that the firm would experience under a variety of normal and extreme market conditions, across asset classes, for all our trading desks globally Verifying and approving pricing models Advising on the modeling of complex trades Reporting market risk information to external bodies Participating in evaluating and introducing new products and business The department is made up of the following three groups with representation in New York, London, Tokyo, Hong Kong, Seoul, Singapore and Bangalore. Market Risk Analysis is responsible for measuring, analyzing and reporting market risk, including monitoring adherence to limits. Varieties of quantitative measures are used, including Value at Risk (VaR) and stress tests. Much focus is given to liquidity and risk concentration. This team is at the center of the firm's daily trading activities and looks at all businesses and asset classes across the firm globally. Market Risk Analysis is looking for pro-active and driven people with a great eye for detail, strong analytical skills and a strong desire to truly understand the financial markets. Those who join us will be able to operate at a fast pace and in a constantly changing risk environment. Market Risk Strategies is responsible for designing and implementing market risk measurement models as well as approving pricing models used by the firm. The group is comprised of two teams: Risk Modeling and Derivatives Analysis. Risk Modeling is the core group that designs and implements all risk models for our trading portfolio, including VaR models, stress testing and hedging analysis. We are looking for people who have strong quantitative and technological training.

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Derivatives Analysis consists of derivatives modeling experts focused on the risk management of exotic derivatives. The group assesses and quantifies model risk, approves all pricing models and advises senior management on the risks associated with particularly large and complex transactions. Corporate Risk is responsible for calculating, monitoring and reporting our market risk capital to regulators. By attributing risk capital to individual trading businesses, the group also plays a direct role in the strategic risk/reward decision-making process.

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Chapter No. 3-Conceptual Framework

3.1 Concept of International Investment

The strategy of selecting globally-based investment instruments as part of an investment portfolio. International investing includes such investment vehicles as mutual funds, Depository Receipts, exchange-traded funds (ETFs) or direct investments in foreign markets. People often invest internationally for diversification, to spread the investment risk among foreign companies and markets; and for growth, to take advantage of emerging markets. International investments can be included in an investment portfolio to provide diversification and growth opportunities. All types of investments involve risk, and international investing may present special risks, including: -Fluctuations in currency exchange rates -Changes in market value -Significant political, economic and social events -Low liquidity -Less access to important information -Foreign legal remedies -Varying market operations and procedures International investing is a procedure that many investors choose to get involved in by investing money outside of their domestic market. For example, instead of holding a portfolio of only domestic stocks and bonds, an investor could purchase some stocks

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from a foreign country or buy shares of a mutual fund that specializes in international investment. There are several ways that you could choose to invest internationally. Mutual funds and exchange traded funds are one of the most common methods. This allows you to invest money in a fund and then the fund manager buys foreign investments. Another method is the depository receipt. This is an investment in which an investment bank purchases shares in a foreign corporation and then issues domestic shares that can be traded on the stock exchange. There are a few benefits that you can realize by investing internationally that may not come with traditional investments. By investing internationally, you can diversify your portfolio more than you could with only domestic investments. If the economy of your country performs poorly, having money in another economy can keep the value of your portfolio up. Another benefit of this type of investment is that it can provide large amounts of growth. Many investors focus on emerging markets of the world where there is ample opportunity for growth. HISTORY International business is not a new phenomenon; it extends back into history beyond the Phoenicians. Products have been traded across borders throughout recorded civilization, extending back beyond the Silk Road that once connected East with West from Xian to Rome. The Silk Road was probably the most influential international trade route of the last two millennia, literally shaping the world as we know it. For example, pasta, cheese, and ice cream, as well as the compass and explosives, among other things, were brought to the Western world from China via the Silk Road. From the colonial era to 1914, the United States was a debtor nation in international accounts; that is, Americans owed more to foreigners than foreigners owed to Americans. From roughly 1917-1918 to the mid-1980s, this relationship was reversed: the United States became a creditor country. In the mid-1980s, another major transformation occurred as the nation moved from net creditor back to net debtor, at least as officially measured.
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FOREIGN DIRECT INVESTMENT Foreign direct investmentwhich means investment in manufacturing and service facilities in a foreign countryis another facet of the increasing integration of national economies. Between 1990 and 1997, the value of international trade grew by just under 60 percent in dollar terms, whereas foreign direct investment nearly doubled over the same period. Most of this investment went from one developed country to another, but a growing share is now going to developing countries, mainly in Asia. The overall annual world inflow of foreign direct investment reached $400 billion in 1997. Flows to developing countries in 1997 amounted to $149 billion, representing 37 percent of all global foreign direct investment, compared with $34 billion, or 17 percent of all foreign direct investment, in 1990. In the past, foreign direct investment was considered to be an alternative to exports in order to avoid tariff barriers. However, today foreign direct investment and international trade have become complementary. For example, Dell Computer uses a factory in Ireland to supply personal computers in Europe instead of exporting from Austin, Texas. Similarly, Honda, a Japanese automaker with a major factory in Marysville, Ohio, is the largest exporter of automobiles from the United States. As firms invest in manufacturing and distribution facilities outside their home countries to expand into new markets around the world, they have added to the stock of foreign direct investment. The increase in foreign direct investment is also promoted by the efforts of many national governments to attract multinationals and by the leverage that the governments of large potential markets, such as China and India, have in granting access to multinationals. Sometimes trade friction can also promote foreign direct investment. Investment in the United States by Japanese companies is, to some extent, a function of the trade imbalances between the two nations and of the U.S. government's consequent pressure on Japan to do something to reduce the bilateral trade deficit. Since most of the U.S. trade deficit with Japan is attributed to Japanese cars exported from Japan, Japanese automakers, such as Honda, Toyota, Nissan, and Mitsubishi, have expanded their local production by setting up production facilities in the United States. This localization
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strategy reduces Japanese automakers' vulnerability to retaliation by the United States under the Super 301 laws of the Omnibus Trade and Competitiveness Act of 1988. PORTFOLIO INVESTMENT The increasing integration of economies also derives from portfolio investment (or indirect investment) in foreign countries and from money flows in the international financial markets. Portfolio investment refers to investments in foreign countries that are withdraw able at short notice, such as investment in foreign stocks and bonds. In the international financial markets, the borders between nations have, for all practical purposes, disappeared. The enormous quantities of money that are traded on a daily basis have assumed a life of their own. When trading in foreign currencies began, it was as an adjunct to the international trade transaction in goods and services banks and firms bought and sold currencies to complete the export or import transaction or to hedge the exposure to fluctuations in the exchange rates in the currencies of interest in the trade transaction. However, in today's international financial markets, traders usually trade currencies without an underlying trade transaction. They trade on the accounts of the banks and financial institutions they work for, mostly on the basis of daily news on inflation rates, interest rates, political events, stock and bond market movements, commodity supplies and demand, and so on. The weekly volume of international trade in currencies exceeds the annual value of the trade in goods and services. The effect of this trend is that all nations with even partially convertible currencies are exposed to the fluctuations in the currency markets. A rise in the value of the local currency due to these daily flows vis--vis other currencies makes exports more expensive (at least in the short run) and can add to the trade deficit or reduce the trade surplus. A rising currency value will also deter foreign investment in the country and encourage outflow of investment. It may also encourage a decrease in the interest rates in the country if the central bank of that country wants to maintain the currency exchange rate and a decrease in the interest rate would spur local investment. An interesting example is the Mexican meltdown in early 1995 and the massive devaluation of the peso, which was exacerbated by the withdrawal of money by foreign investors. The massive depreciation of many Asian currencies in the 1997-1999 period, known as the Asian
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financial crisis, is also an instance of the influence of these short-term movements of money. Today, the influence of these short-term money flows is a far more powerful determinant of exchange rates than an investment by a Japanese or German automaker.

Following are the financial instrument which are traded in international investment International Equity Funds International equity funds are funds that create geographically diversified portfolios These funds are divided into two categories, those who invest exclusively in foreign securities and those who invest in both domestic market and abroad markets. They are considered more aggressive than domestic funds that invest only in foreign market. The main benefit of broadly diversified international equity funds is the opportunity to take advantage of political and economical circumstances in different regions. A visual representation of the principal investment characteristics of foreign stocks and foreign stock funds. The international equity style box is a valuable tool for investors to use to determine the risk-return structures of their international stocks/portfolios and/or how these investments fit into their investing criteria. It is also known as an "international stock style box". Commodity A commodity is a good for which there is demand, but which is supplied without qualitative differentiation across a market. A commodity has full or partial fungibility; that is, the market treats it as equivalent or nearly so no matter who produces it. Examples are petroleum and copper. The price of copper is universal, and fluctuates daily based on global supply and demand. Commodity trading is one of the preferred investment options. A huge number of investors put their money in these options for several reasons like less volatility of this market. At the same time the growth prospects of this market are also good. The commodity market investors put their money in both the national and international markets and the recent growth in the international markets have attracted
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more investors. Making investments in the international commodities markets is not a new concept. There are a number of such exchanges and the United States of America has the maximum number of commodities followed by the United Kingdom. Only those commodities are selected for trading purpose that has huge demand in the local market. Some of these are the agricultural products, metals, petroleum etc. At the same time, there are certain international commodities exchanges that have been built for the purpose of trading some particular commodities like coffee, gold, petroleum and so on. The futures and options are a part of the international commodity trading activities and the international commodity exchanges are used for future or commodity trading. Both of these are kind of contracts with different features related to the commodity trading. Bonds The foreign bond market is that in which bonds are brought out by foreign borrowers. The foreign bonds are normally designated in the local currency. The local market authorities look after the issuing and selling of foreign bonds. The foreign bonds are traded in the foreign bond markets which constituted a significant portion of the international bond market until a few decades ago. Some defining characteristics of the foreign bond markets are: Issuers are normally governments and private sector utilities such as the railway companies It was standard practice to underwrite as well as organize underwriting risk Issues were pledged by the retail investors and the institutional investors The structure of a foreign bond at that time is similar to the present day foreign bonds Continental private banks and old merchant houses in London connected the investors and the issuers

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Eurobonds - Eurobonds differ from the others in that they are not sold in any particular national bond market. Eurobonds are issued by a group of multinational banks. If a Eurobond is designated in any currency, it would be sold outside the country which uses that currency. For example if a Eurobond is denominated in the United States dollar, it would not be sold in the United States. Derivative Derivative means a security whose price is dependent upon or derived from one or more underlying assets. The derivative itself is merely a contract between two or more parties. Its value is determined by fluctuations in the underlying asset. The most common underlying assets include stocks, bonds, commodities, currencies, interest rates and market indexes. Most derivatives are characterized by high leverage.

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3.2 International Diversification

Although international diversification can be identified as one of the above mentioned forms (related or unrelated) depending on the area of the main business activities, it should be discussed separately because of its specific features and significance for the company development. Multinational diversification is considered one of the strategic paths to continue diversifying the company activities after the diversification at national level has been completed. It also includes diversification of business and of national markets. This process requires to be developed and executed at different strategies - for the different sectors of the company business on the one side, for the different countries (consistent with their national characteristics) on the other. These strategies have to be developed by high competence managers. Regardless of the great challenges and difficulties of its implementation, multinational diversification attracts companies with big opportunities for long term growth by entering new business sectors and growth in the existing business on the markets of other (new for the company) countries. At the same time it can increase the competitive advantages of the business in different ways:

Full use of resources and distribution of costs on the basis of the growing market and product range which leads to economies of scale and accumulated new experience.

As a result of the larger scale there are opportunities to capitalize savings during the integrated work in the different sectors using the existing expertise along the business chain.

Valuable resources can be transferred from business to business and from country to country.

Highly competitive and well-known trademarks can be used jointly. Partnership potential can be capitalized in the form of the different business sectors and countries and strategic coordination.

The different business activities at home and abroad can be funded internally which brings better instruments to fight competition and achieve higher sales.

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Foreign Investment in India

Indias share in FDI inflows among developing countries reached a peak of 1.9 per cent in 1997. It declined sharply to 1 per cent in 1999 and 2000 but has recovered sharply to 1.7 per cent in 2001. Indias performance on the FDI front has shown a significant improvement since last year. FDI inflows grew by 65 per cent to US$ 3.91 billion during 2001-02 thus exceeding the previous peak of US $ 3.56 billion in 1997-98 (as per BOP accounts of RBI). This growth of 65 per cent is particularly encouraging at a time when global FDI inflows have declined by over 40 per cent. The upward trend in FDI inflows has been sustained during the current financial year with FDI Inflows during April-June 2002 about double that during the corresponding period of 2001. In 2000, China with 17 per cent had the highest share of developing country FDI followed by Brazil with 13.9 per cent of developing country FDI. The gap between the shares of these two countries narrowed during the nineties with Brazil gradually catching up with China, but has again widened in 2001. Though the share of Argentina, South Korea, Singapore, Malaysia and Taiwan is much lower than that of China and Brazil, it was, till 2000two to five times that of Indias measured inflow.3 The most remarkable transformation has occurred in South Korea, whose share in developing country FDI inflows was identical to that of India in 1993, and which fell below that of India in 1994 and 1995, but was four times that of Indias in 2000. Because of the Asian crisis in 199798 and the effect of sanctions on investors sentiment, Indias share of developing country FDI fell at the end of the nineties. There has however been a significant improvement during 2001. Indias measured FDI as a percentage of total Gross Domestic Product(GDP) is quite low in comparison to other competing countries. India the 12th largest country in the world in terms of GDP at current exchange rates is able to attract FDI equal only to 0.9 percent of its GDP in 2001. In contrast FDI inflows into Vietnam were 6.8 per cent of its GDP in 2000. Even Malaysia, which has recently developed an image of being somewhat against the globalization paradigm, receives FDI equal to 3.9 per cent of its GDP. Similarly China attracts FDI equal to 3.8 per cent of its GDP. Thailand, which has a relatively low FDI-GDP ratio among the major developing country recipients of FDI, had a ratio four times that of India in 2000. This gap probably

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narrowed in 2001 and could narrow further in 2002 if the recent acceleration in growth of FDI into India can be sustained.

Foreign institutional investors (FIIs) in India

Foreign institutional investors (FIIs) that have been betting big on the Indian equity market this year have seen their cumulative inflows since 1992 cross a significant milestone of $100 billion. According to data available with the Securities and Exchange Board of India (Sebi) net cumulative FII inflows as on November 10, 2010 was $101.25 billion. The market regulator maintains data on FII inflows since November 1992. Meanwhile, the current calendar year has also been the best in terms of annual FII inflows. According to Sebi, FIIs have been net buyers at $28.64 billion in 2010.The record inflows have come at a time when most of the leading economies of the world are fighting against a slowdown in domestic growth. With interest rates hovering around near-zero levels in most of Europe and US, global investors are borrowing cheap and investing in countries that offer the potential of an attractive return on investment. India's benchmark indices - Sensex and Nifty - have also been one of the best-performing equity indices of the world in the recent past. Interestingly, the massive buying by foreign investors comes at a time when most of the domestic institutional investors, including mutual funds and insurance companies have been sellers in the Indian equity market. As on November 10, there are a total of 1,738 FIIs registered in India, according to Sebi. Further, the number of registered subaccounts is 5,592. Apart from the equity market, FIIs have also invested nearly $18 billion in the Indian debt market ever since November 1992.India has emerged as the star performer in terms of attracting foreign inflows into the domestic equity market. The net inflow into India has been significantly higher than the whole of Asia put together. Thus, despite of the fact that the undertone of most recent reports by leading foreign institutional investors (FIIs) has been cautious.

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ADR - American Depositary Receipt An American Depositary Receipt (ADR) is how the stock of most foreign companies trades in United States stock markets. Each ADR is issued by a U.S. depositary bank and represents one or more shares of a foreign stock or a fraction of a share. If investors own an ADR they have the right to obtain the foreign stock it represents, but U.S. investors usually find it more convenient to own the ADR. The price of an ADR is often close to the price of the foreign stock in its home market, adjusted for the ratio of ADRs to foreign company shares. Depository banks have numerous responsibilities to the holders of ADRs and to the non-U.S. company the ADRs represent. The largest depositary bank is The Bank of New York. Individual shares of a foreign corporation represented by an ADR are called American Depositary Shares (ADS). Indian ADR Trading in US ADR ISSUE DR. REDDY'S LABORATORIES LTD. HDFC BANK LTD. ICICI BANK LTD. INFOSYS TECHNOLOGIES LIMITED MAHANAGAR TELEPHONE NIGAM LIMITED REDIFF.COM INDIA LTD SATYAM COMPUTER SERVICES LIMITED SIFY LTD. VIDESH SANCHAR NIGAM LIMITED WIPRO LTD.
(* source 39 | P a g e


INDUSTRY Pharmaceutical Banks Banks Technology Services Fixed Line Comm. Technology Services Technology Services Technology Services Fixed Line Comm. Technology Services


GDR - Global Depositary Receipt Global Depository Receipt (GDR) - certificate issued by international bank, which can be subject of worldwide circulation on capital markets. GDR's are emitted by banks, which purchase shares of foreign companies and deposit it on the accounts. Global Depository Receipt facilitates trade of shares, especially those from emerging markets. Prices of GDR's are often close to values of shares. Very similar to GDR's are ADR's. GDR's are also spelled as Global Depositary Receipt.

Indian GDR
GDR Companies
# euro convertible bond **adjusted for bonus

Industry Segregation

Size Of GDR Issue US $ Mill 125.00 137.77 110.00 35.00 50.00 125.00 100.00 125.00 70.00 50.00 25.00 48.00 40.00 40.00 55.00 30.00 100.00 61.11 22.50 45.00 90.00 100.00

Shares per GDR

GDR Issue Price **(US$)

Arvind Mills Ashok Leyland Bajaj Auto Ballarpur Ind.# Bombay Dye BSES Ltd Century Textiles CESC Core Parent Crompton Greaves DCW Dr. Reddy's E. I. Hotels EID Parry Finolex Cab Flex Industries G.E. Shipping G.N.F.C GAIL Garden Silk Grasim (1st) Grasim (2nd)

Textiles Autos Autos Paper Textiles Power Diversified Power Pharma Electrical Diversified Pharma Hotels Fertiliser Cables Packaging Shipping Fertiliser Oil & Refineries Textiles Diversified Diversified

1.0 3.0 1.0 1.0 1.0 3.0 2.0 1.0 1.0 1.0 5.0 1.0 1.0 1.0 1.0 2.0 5.0 5.0 6.0 5.0 1.0 1.0

9.78 12.79 16.89 8.77 9.20 14.40 254.00 10.67 12.60 7.56 13.55 11.16m 9.30 8.39 16.60 8.05 15.94 12.75 9.67 26.28 12.98 20.50

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GujAmbuja # Himachal Futuri Hindalco (1st) Hindalco (2nd) Hindustan Dev. India Cements Indian Alum. Indian Hotels Indian Rayon Indo Gulf Indo Rama ICICI ICICI (ADR) Infosys IPCL ITC J.K. Corp Jain Irrig JCT Ltd. KesoramInd L & T (1st) L & T (2nd) Mah&Mah MTNL NEPC Micon Nippon Denro# Oriental Hotels Ranbaxy Labs Raymond Woolen Reliance Reliance (2nd) Reliance Petroleum S.A.I.L. Satyam Infoway S.I.E.L. Sanghi Poly SIV Ind SPIC SBI

Cement Telecomm. Aluminium Aluminium Diversified Cement Aluminium Hotels Diversified Fertiliser Textiles Finance Finance IT Petrochemicals Cigarettes Diversified Plastics Textiles Diversified Diversified Diversified Autos Telecom Diversified Steel Hotels Pharma Textile Diversified Diversified Diversified Steel IT Diversified Textiles Textiles Fertiliser Banking

80.00 50.00 72.00 100.00 76.00 90.00 60.00 86.25 125.00 100.00 50.00 230.00 315 70.38 85.00 68.85 55.00 30.00 45.00 30.00 150.00 135.00 74.75 418.53 47.70 125.00 30.00 100.00 60.00 150.00 300.00 100 125.00 75.00 40.00 50.00 45.00 65.00 369.95

1.0 4.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 10.0 5.0 5.0 0.5 3.0 1.0 1.0 1.0 10.0 1.0 2.0 2.0 1.0 2.0 1.0 10.0 1.5 1.0 2.0 2.0 2.0 15.0 15.0 1.0 3.0 5.0 1.0 5.0 2.0

5.95 9.30 10.73 16.00 2.05 4.23 6.77 16.60 15.01 4.51 11.37 11.50 9.80 34 13.87 7.65 8.00 11.13 16.96 1.60 16.70 15.35 4.46 11.958 3.18 21.36 12.75 19.38 10.61 16.35 23.50 23.0 12.97 18.0 14.64 9.56 6.37 11.15 14.15

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Sterlite India# Tata Electric Telco (1st) Telco (2nd) Tube Invest United Phos. UshaBeltron Videocon Int. VSNL Wockhardt

Diversified Power Autos Autos Cycles & Acc. Pesticides Cables Electronics Telecomm. Pharma

100.00 65.00 115.00 200.00 45.60 55.00 35.00 90.00 527.00 75.00

1.0 100.0 1.0 1.0 1.0 1.0 1.0 1.0 0.5 1.0

17.86 710.00 8.75 14.25 6.58 20.50 10.70 8.10 13.93 14.35

(* source

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3.3 Barriers to International Investment

We all know that the investment and risk are cannot be separated. In case of, international investment there is also relation between risk and investment. International investment includes Foreign Direct Investment (FDI), Portfolio investment by foreigner investors & institutions or investment in foreign securities. Generally it is considered that the foreign investment beneficial for both developed and developing countries but there are many hurdles have faced by MNCs, foreign investors in their home country and also in foreign countries. It is a mistake to view international investments in isolation. The key to investing in foreign markets is to develop a strategy an investor will be comfortable with and not abandon prematurely. This will also depend upon an ability to accept day- to- day fluctuations, some of which may not be in ones hands at all. In case of domestic investment investors can inform about risk very easily but in case of foreign investment they have a little idea about risks in foreign investment. Investors cant get information about foreign market without mediums like newspaper, news channels & Internet but it cannot help much. Following are some of common risks while investing abroad are as follows 1) Correlation between International & Domestic Investments 2) Higher costs to transactions in foreign securities 3) Investor Psychology in offshore markets Along with these common risks investors, institutions & MNCs have to face many barriers that explained in above topics.

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3.4 Foreign Exchange Risk

Foreign exchange risk means 1) It is a probability of loss that might occur according to the changes in Forex rates. 2) Foreign exchange risk that the prices will have to be closed out specified by an adverse in oscillations of exchange rates. It is also called as currency risk or exchange-rate risk. This foreign exchange risk in the ordinary course of events influences business of export and import. Besides, it can affect investors who have made some international investments. The example of such foreign exchange risk may be in an investment with the currency exchange rate during converting money to another currency when its value is decreasing or increasing as if it needs to be converted back into the original currency. Foreign exchange risk for global corporate are more referred as exposures. Foreign exchange risk arises through transaction, translation and economic exposures. It may also arise from commodity-based transactions where commodity prices are determined and traded in another currency. Exposure is a measure of the sensitivity of the value of a financial item (asset, liability or cash flow) to changes in the relevant risk factor while risk is a measure of variability of the value of the item attributable to the risk factor. Let us understand this distinction clearly. April 1993 to about July 1995 the exchange rate between rupee and US dollar was almost rock steady. Consider a firm whose business involved both exports to and imports from the US. During this period the firm would have readily agreed that its operating cash flows were very sensitive to the rupee-dollar exchange rate, i.e.; it had significant exposure to this exchange rate; at the same time it would have said that it didnt perceive significant risk on this account because given the stability of the rupee-dollar fluctuations would have been perceived to be minimal. Thus, the magnitude of the risk is determined by the magnitude of the exposure and the degree of variability in the relevant risk factor.

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Foreign Exchange Exposure

Transaction Exposure

Translation Exposure

Economic Exposure

Exposure from changing in commodities prices

Transaction Exposure
Transaction exposure, defined as a type of foreign exchange risk faced by companies that engage in international trade, exists in any worldwide market. It is the risk that exchange rate fluctuations will change the value of a contract before it is settled. Transaction exposure is also called transaction risk. Transaction exposure, meaning risk that foreign exchange rate changes will adversely affect a cross-currency transaction before it is settled, can occur in either developed or developing nations. A cross-currency transaction is one that involves multiple currencies. A business contract may extend over a period of months. Foreign exchange rates can fluctuate instantaneously. Once a crosscurrency contract has been agreed upon, for a specific quantity of goods and a specific amount of money, subsequent fluctuations in exchange rates can change the value of that contract. A company that has agreed to but not yet settled a cross-currency contract that has transaction exposure. The greater the time between the agreement and the settlement of the contract, the greater the risk associated with exchange rate fluctuations.

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Example For example, lets say a domestic company signs a contract with a foreign company. The contract states that the domestic company will ship 1,000 units of product to the foreign company and the foreign company will pay for the goods in 3 months with 100 units of foreign currency. Assume the current exchange rate is: 1 unit of domestic currency equals 1 unit of foreign currency. The money the foreign company will pay the domestic company is equal to 100 units of domestic currency. The domestic company, the one that is going to receive payment in a foreign currency, now has transaction exposure. The value of the contract is exposed to the risk of exchange rate fluctuations. The next day the exchange rate changes and then remains constant at the new exchange rate for 3 months. Now one unit of domestic currency is worth 2 units of foreign currency. The foreign currency has devalued against the domestic currency. Now the value of the 100 units of foreign currency that the foreign company will pay the domestic company has changed the payment is now only worth 50 units of domestic currency. The contract still stands at 100 units of foreign currency, because the contract specified payment in the foreign currency. However, the domestic firm suffered a 50% loss in value.
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Translation Exposure
Translation exposure is a type of foreign exchange risk faced by multinational corporations that have subsidiaries operating in another country. It is the risk that foreign exchange rate fluctuations will adversely affect the translation of the subsidiarys assets and liabilities denominated in foreign currency into the home currency of the parent company when consolidating financial statements. Translation exposure is also called accounting exposure, or translation risk. Translation exposure can affect any company that has assets or liabilities that are denominated in a foreign currency or any company that operates in a foreign marketplace that uses a currency other than the parent companys home currency. The more assets or liabilities the company has that are denominated in a foreign currency, the greater the translation risk. Ultimately, for financial reporting, the parent company will report its assets and liabilities in its home currency. So when the parent company is preparing its financial statements, it must include the assets and liabilities it has in other currencies. When valuing the foreign assets and liabilities for the purpose of financial reporting, all of the values will be translated into the home currency. Therefore foreign exchange rate fluctuations actually change the value of the parent companys assets and liabilities. This is essentially the definition of accounting exposure. Example Here is a simplified example of accounting exposure. Assume the domestic division of a multinational company incurs a net operating loss of $3,000. But at the same time, a foreign subsidiary of the company made of profit of 3,000 units of foreign currency. At the time, the exchange rate between the dollar and the foreign currency is 1 to 1. So the foreign subsidiarys profit exactly cancels out the domestic divisions loss. Before the parent company consolidates its financial reports, the exchange rate between the dollar and the foreign currency changes. Now 1 unit of foreign currency is only worth
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$.50. Suddenly the profit of the foreign subsidiary is only worth $1,500 and it no longer cancels out the domestic divisions loss. Now the company as a whole must report a loss. This is a simplified example of translation exposure.

Economic Exposure
Exposure determination in the accounting sense points out those items which will have a negative effect on consolidation if the currency in which they are denominated should change in value. Whichever translation convention is used, the resultant consolidation merely indicates the reported position of a group at a given point in time, based on historical events. However, this does not necessarily show the opening impact of a parity change on any single member of the group or the effect on future flows of income in the group. Both of these are included in the term "economic exposure," which attempts to give management an additional means of analyzing effects of foreign exchange movements on operations, profits, and net worth. It can be important to identify economic exposure from the very beginning of foreign exchange policy determination. Cash is a typical example; it is among those current assets always translated at current rates and affected by devaluation. The group position may show, due to hedging or offsetting, a neutral position in a particular currency. A subsidiary's ultimate liquidity position, however, can be significantly different depending upon the expected disposition of its cash balances when its own currency devalues. If liquid balances have been built up for imports or dividend payments, a local devaluation will have an impact on the subsidiary not always identified by the parent. Even if the group is covered against the currency in question, the liquidity of the subsidiary is impaired; the parent may not be able to augment it. A similar effect on liquidity can arise from parity changes involving accounts payable, accounts receivable, or short-term debt or the local subsidiary.

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The realization of inventory presents a further example. Inventory to be sold in only one market may be considered an exposed asset if its price cannot be raised after a local devaluation. It is, however, important to identify the price elasticity of inventory and its ultimate destination (hard currency markets, for example) to determine which portion is exposed and which is not. This should be included in the identification of economic exposure; knowing the elasticity element can allow the group to raise prices before the event. After the initial data gathering and consolidation, the corporate policy vis-a-vis its foreign exchange position should be established, usually by a senior management committee with representatives of treasury, controller, and sales divisions. Foreign exchange policy must be consolidated with the general financial policy of the company. Short-term borrowing by a subsidiary for working capital purposes and anticipated future borrowing will affect both corporate liquidity and exchange exposure. Short-term investments in several currencies both have exchange and liquidity, as well as risk, aspects. At the senior management level, the company will determine whether its foreign exchange policy should be basically cautious or aggressive. If it is to be cautious, management essentially wishes to remain covered against foreseeable exchange risk and devote managerial attention to more basic areas such as product development and marketing. Under a cautious policy the attitude is that the firm's operations should basically be protected against risk of loss in foreign exchange that is, insulated from the international environment in that regard.

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Foreign Exchange Exposure from Commodity Prices

Since many commodities are priced and traded internationally in U.S dollars, exposure to commodities prices may indirectly result in foreign exchange exposure for non-U.S organizations. Even when purchases or sales are made in the domestic currency, exchange rates may be embedded in, and a component of, the commodity price. In most cases, suppliers of commodities, like any other business, are forced to pass along changes in the exchange rate to their customers or suffer losses themselves. In real world by splitting the risk into currency and commodity components, an organization can access both risks independently, determine an appropriate strategy for dealing with price and rate uncertainties, and obtain the most efficient pricing. Protection through fixed rate contracts that provide exchange rate protection is beneficial if the exchange rate moves adversely. However, if the exchange rate moves favorably, the buyer might be better off without a fixed exchange rate. Without the benefit of hindsight, the hedger should understand both the exposure and the market to hedge when exposure involves combined commodity and currency rates.
(*source-page no 195 chapter 10 th Obstacles to International Investment, Book -Global Capital Market , by DipakAbhyankar)

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Language differences, Different accounting standards and methods, and high cost of sources of information on companies in some market are information barriers to investment. Information is more available to any local corporate. Home court advantage is evident in international portfolio investment. Information Asymmetry In economics and contract theory, information asymmetry deals with the study of decisions in transactions where one party has more or better information than the other. This creates an imbalance of power in transactions which can sometimes cause the transactions to go awry. Examples of this problem are adverse selection and moral hazard. Information asymmetry models Information asymmetry models assume that at least one party to a transaction has relevant information whereas the others do not. Some asymmetric information models can also be used in situations where at least one party can enforce, or effectively retaliate for breaches of, certain parts of an agreement whereas the others cannot

Information Assymetry

Adverse Selection

Morale Hazard
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Adverse selection
Adverse selection, anti-selection, or negative selection is a term used in economics, insurance, statistics, and risk management. It refers to a market process in which "bad" results occur when buyers and sellers have asymmetric information (i.e. access to different information): the "bad" products or services are more likely to be selected. A bank that sets one price for all its checking account customers runs the risk of being adversely selected against by its low-balance, high-activity (and hence least profitable) customers. Two ways to model adverse selection are with signaling games and screening games. Moral Hazard In economic theory, moral hazard is a situation in which a party insulated from risk behaves differently from how it would behave if it were fully exposed to the risk. Moral hazard arises because an individual or institution does not take the full consequences and responsibilities of its actions, and therefore has a tendency to act less carefully than it otherwise would, leaving another party to hold some responsibility for the consequences of those actions. For example, a person with insurance against automobile theft may be less cautious about locking his or her car, because the negative consequences of vehicle theft are (partially) the responsibility of the insurance company. Economists explain moral hazard as a special case of information asymmetry, a situation in which one party in a transaction has more information than another. In particular, moral hazard may occur if a party that is insulated from risk has more information about its actions and intentions than the party paying for the negative consequences of the risk. More broadly, moral hazard occurs when the party with more information about its actions or intentions has a tendency or incentive to behave inappropriately from the perspective of the party with less information. Moral hazard also arises in a principal-agent problem, where one party, called an agent, acts on behalf of another party, called the principal. The agent usually has more information about his or her actions or intentions than the principal does, because the principal usually cannot completely monitor the agent. The agent may have an incentive
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to act inappropriately (from the viewpoint of the principal) if the interests of the agent and the principal are not aligned. In finance In the period 1998-2007 regulators kept and published detailed statistics on the ethnicity and location of those receiving loans, but failed to pay similar attention to their credit worthiness, default rates or vulnerability to a housing downturn. The data that the regulators focused on was more relevant to politically mobilizing voting blocks in particular electorates than to keeping the financial system solvent. Brokers, who were not lending their own money, pushed risk onto the lenders. Lenders, who sold mortgages soon after underwriting them, pushed risk onto investors. Investment banks bought mortgages and chopped up mortgage-backed securities into slices, some riskier than others. Investors bought securities and hedged against the risk of default and prepayment, pushing those risks further along. In a purely capitalist scenario, the last one holding the risk (like a game of musical chairs) is the one who faces the potential losses. In the 2007 2008 subprime crisis, however, national credit authorities in the U.S., the Federal Reserve assumed the ultimate risk on behalf of the citizenry at large. Others believe that financial bailouts of lending institutions do not encourage risky lending behavior, since there is no guarantee to lending institutions that a bailout will occur. Decreased valuation of a corporation before any bailout will prevent risky, speculative business decisions by executives who conduct due diligence in their business transactions. The risk and burdens of loss became apparent to Lehman Brothers (who did not benefit from a bailout) and other financial institutions and mortgage companies such as Citibank and Countrywide Financial Corporation, whose valuation plunged during the subprime mortgage crisis.

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In management Moral hazard can occur when upper management is shielded from the consequences of poor decision making. This situation can occur in a variety of situations, such as the following: When a manager has a secure position from which he or she cannot be readily removed. When a manager is protected by someone higher in the corporate structure, such as in cases of nepotism or pet projects. When funding and/or managerial status for a project is independent of the project's success. When the failure of the project is of minimal overall consequence to the firm, regardless of the local impact on the managed division. When a manager may readily lay blame on an innocent subordinate. When there is no clear means of determining who is accountable for a given project.

Accounting methods and principles

Financial ratios may not be directly comparable between companies that use different accounting methods or follow various standard accounting practices. Most public companies are required by law to use generally accepted accounting principles for their home countries, but private companies, partnerships and sole proprietorships may not use accrual basis accounting. Large multi-national corporations may use International Financial Reporting Standards to produce their financial statements, or they may use the generally accepted accounting principles of their home country. There is no international standard for calculating the summary data presented in all financial statements, and the terminology is not always consistent between companies, industries, countries and time periods. All over the world, different countries vary in their general accounting
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procedures since each nation has its own financial framework. Although the GAAP has been agreed upon, accountants from every country still needs to adhere to certain type of financial reporting. Some countries follow GAAP but more developed countries prefer International Accounting standards (IAS). Every country has its own unique political and social climate that affects the government. The body solely responsible for regulatory guidelines that affect accounting reports and practices is the government. International accounting exists because the financial transaction of developed countries is more complicated than that of developing nations. Some set of information for one country may not be relevant or applicable in another countrys finances. For example, Japan employs a complex form of accounting that even code breakers have a hard time deciphering. History may be a factor in the development of accounting procedures, for instance US adopted the German practice after the war. Nonetheless, the International Accounting Standards have been established so that countries can adhere to a guideline for accounting reports. The IAS contains the directives on how some accounting transactions should be reported and recorded in financial statements. It can aid companies that deal with different countries for their product by consolidating varying forms of accounting reports. Also, countries that meet and discuss business regulations can establish and analyze financial transactions coming from one point. The IAS was formerly issued by the Board of the International Accounting Standards Committee (IASC). The international financial reporting standards were recognized after it was release in 2001. It must be emphasized that IASC provides guidelines for its member countries but cannot impose members to comply with the set standards. It is just an agreement between countries to report in accordance to what has been set by IAS for publicly-traded companies. The paradigm shift in the economic environment in India during last few years has led to increasing attention being devoted to accounting standards as a means towards ensuring potent and transparent financial reporting by corporate. Further, cross-border rising of huge amount of capital has also generated considerable interest in the generally accepted accounting principles in advanced countries such as USA. Initiatives taken by International Organization Securities Commission (IOSCO) towards propagating
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International Accounting Standards(IASs)/ International Financial Reporting Standards (IFRSs), issued by the International Accounting Standards Board (IASB), as the uniform language of business to protect the interests of international investors have brought into focus the IASs/ IFRSs. The Institute of Chartered Accountants of India, being a premier accounting body in the country, took upon itself the leadership role by establishing Accounting Standards Board, more than twenty five years ago, to fall in line with the international and national expectations. Today, accounting standards in India have come a long way. Presented hereinafter are some salient features of the accounting standardsetting endeavors in India.

Language Differences
Every country in the world has its own culture and value base. The changing face of the world's economy has seen some of the most successful countries of the 20th Century in danger of losing their economic stronghold in the 21st.China for example has found itself in the midst of social, economic and cultural changes; it now stands second in the league for richest countries. English language levels in this country are quite sketchy. Mandarin is the most common language as well as the official dialect, the aid of a translator is necessary to avoid misunderstandings and mistranslations. It is important when dealing with other cultures, to recognize that, your own culture and sense of identity can have an impact on your approach to work and business later in life. It would be prudent to do some research on any culture you may be working with. When dealing with colleagues or clients from a different culture, you need to know your own approach to culture and the approach of the other culture. This should form part of your business strategy or structure; most people conform to a certain national business culture, in order to spot differences you will need to be able to communicate effectively, the services of a translator or interpreter should be a prime consideration. As we are already aware, communication problems do not arise solely due to the fact that people speak different languages, other factors can make cross culture communication difficult. For example what one culture feels to be a very positive
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communications style, can be seen as downright rude by another culture. Misreading a situation because of differing communication styles is bad for business. Many cultures place emphasis on written communication, only when something is written down do they have a strong belief in it. The margin for error here is massive, the need to have the correct information written down and in the style of the culture you are dealing with, may be the difference between one deal only, or a continuation of business. A translator who is proficient in that language and who also has knowledge of the culture, will save you time and money in the long-term.

High cost of sources of information on companies

There are many sources marketers can turn to in order to obtain research information. However, while research seekers can get lucky finding information through inexpensive means, the realty is that, in many situations, locating in-depth, numbersrelated market information is difficult and expensive. Companies in the business of producing market metrics are mostly doing so to make money and do not give the information away for free. Consequently, in many research situations, especially those in which reliable market estimates are critical, acquiring the best researched market information requires a fee. Expensive sources of information generally include accessing reports from the originators of the research, such as market research firms. However, since gaining access to good research can be costly, on the surface it may not seem practical for small companies or individuals to take advantage of these sources. Yet, research seekers also know that the level of detail available in a single report may be enough to provide answers to most of their questions in which case these reports can be real time savers (though marketers are cautioned against relying on a single source for information to make marketing decisions). Also, while the cost of reports can appear prohibitive, todays reports are much more accessible than in the past when research suppliers required clients to sign up for high-priced subscription services. Purchasing a subscription would then give the client access to a large number of reports. Today many information sources permit the purchase
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of single research reports without the requirement to commit to a subscription. Many companies engaged in market research services offer both customized research activities (i.e., produce work only for a single paying client) and commercial research (i.e., produce work that nearly anyone can buy). Commercial reports produced by reputable firms are generally well-researched and contain extensive product/industry metrics and statistics, including forecasts and trend analysis. Often these reports are produced by a specific researcher who has been following the market/industry for many years and produces regular updates which include offering comments and insight that go beyond the numbers. But these reports come with a high price tag. It is not uncommon to pay a large sum for a report that is only a hundred or so pages long. However, as we noted earlier, many research reports are updates of existing reports.

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3.6 Regulatory Barriers

Legal and Regulatory barriers can hinder the flow of goods and services and the movement of capital and people.

Regulatory barrires
Trade barriers Control on capital Government procurement Border & Immigration control Techonological

Trade Barriers
Trade barriers are as ancient as trade itself, and there are many reasons countries impost trade barriers. Trade barriers initially arose in the form of tariffs levied to generate revenue. For many countries, tariffs are a major source of income and are critical to the national economy. Tariffs, quotas and non-tariff barriers such as excessive regulations are now commonly used to protect domestic industry from foreign competition. Finally, countries often use barriers as tools of foreign policy. Very high or low tariffs can be used to reward or punish other nations in support of foreign policy initiatives. This is the premise of most free trade agreements and embargoes, boycotts and sanctions. For all of these reasons, trade barriers are sensitive and controversial issues.

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Import Duties/Tariffs Cultural Barriers Restrictive Tariffs

Lack of Intellectual Property Protection

Export Subsidies

Trade Barriers
Excessive Regulations Countervailing Duties

Licensing Boycotts, Embargoes and Trade sanctions


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TYPES OF TRADE BARRIERS Tariffs, quotas, import licenses, fees and paperwork requirements, and customs barriers that are not uniformly applied. Lack of competitive bidding on government tenders. Burdensome standards, testing, labeling and certification requirements not required of domestic manufacturers. Direct or indirect subsidies by a foreign government in favor of domestic suppliers. Export controls such as license requirements and restricted buyer lists. Intellectual property infringement, including copyright, patent and trademarks. Influence pedaling - company/government interference. Bribery, corruption and requests for payoffs.

Import Duties/Tariffs: For many countries, tariffs are important to the national economy and can help raise funds for important social programs. WTO members have agreed to utilize product identifying codes called Harmonized Tariff Schedule (HTS) for imports and Schedule B forex ports. The first 6 numbers of HTS and Schedule B codes are identical for all WTO member countries. This has simplified tariff application, made it less arbitrary, and thus easier to reduce tariffs on groups of products.

Restrictive Tariffs: Governments select certain import items to limit by placing restrictively high tariffs on them, effectively keeping foreign suppliers out of the market.

Export Subsidies: A federal program of financial assistance to aid domestic producers is considered an export subsidy. This means the government provides a domestic company some kind of financial assistance in order to make that companys product cheaper than a similar imported product. This makes imported products relatively more expensive and less appealing to domestic consumers. Alternatively, a subsidy can make it easier for a
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domestic producer to sell goods in foreign markets, where they might otherwise not be price-competitive. Many subsidies controversial and are alleged to be protectionist (because a country is protecting its domestic producers through the subsidy) and harmful to international trade. Governments maintain subsidies to fund core industries or fledgling industries in order for them to remain viable in the face of foreign competition. This can be done through tax breaks, grants, etc. The WTO sets a ceiling for subsidies, and any subsidy that exceeds that limit is illegal and takes market share away from unsubsidized competitors.

Countervailing Duties: When a country feels another country is dumping products into their market unfairly (selling at less than cost and often with support of subsidies), import duties/tariff scan be an effective tool to offset the discount and protect domestic suppliers. The U.S. request to retaliate against Canadian processed dairy export subsidies is a good example of tariffs as a legitimate tool used to protect industries unfairly harmed by foreign suppliers who dump good sin to their country. Countervailing duties are tariffs imposed to offset discounted Imports often subsidized by foreign governments.

Quotas: National governments select certain import items they want to limit and place quantitative quotas on market access, effectively limiting foreign penetration in the local market. Bans, Boycotts, Embargoes and Trade sanctions: These trade policies can be used in support of foreign policy as reward or punishment for cooperation or lack of cooperation. e.g. Trade sanctions with Iraq were designed to get Iraq to comply with UN resolutions and prevent them from continuing to source items used to manufacture military weapons.

Licensing: Import and export licensing is meant to be used to protect national interests by limiting access to dangerous imports and ensuring that critical technology is not shared with terrorists or rogue nations. If too excessive, they can limit access to foreign markets.
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Excessive Regulations: Standards, testing, labeling and certification: These types of standards arent necessarily trade barriers, but they can be if the standards are too complex for a foreign company to meet compliance. A country may require that foreign products coming into its markets meet its standards, regardless of the standards the products meet in their domestic market. The government can make these standards extremely difficult for a company to meet, and thus discourage imports. Lack of Intellectual Property Protection: A country which has weak protection of intellectual property laws fails to protect imported products from illegal acts like trademark infringement. Cultural Barriers: The most obvious unofficial barriers to free trade are language and cultural differences. These can hinder processing of paperwork, and often are the cause of issues in packaging and labeling. Furthermore, religious nuances and social etiquette unknown to thee exporter can contribute to their products failure in foreign markets. Usually, these barriers can be overcome with research, education and the right in-country partners. Most trade barriers work on the same principle: the imposition of some sort of cost on trade that raises the price of the traded products. If two or more nations repeatedly use trade barriers against each other, then a trade war results. Economists generally agree that trade barriers are detrimental and decrease overall economic efficiency, this can be explained by the theory of comparative advantage. In theory, free trade involves the removal of all such barriers, except perhaps those considered necessary for health or national security. In practice, however, even those countries promoting free trade heavily subsidize certain industries, such as agriculture and steel. Trade barriers are often criticized for the effect they have on the developing world. Because rich-country players call most of the shots and set trade policies, goods such as crops that developing countries are best at producing still face high barriers. Trade barriers such as taxes on food imports or subsidies for farmers in developed economies lead to overproduction and dumping on world markets, thus lowering prices and hurting poor-country farmers. Tariffs also tend to be anti-poor, with low rates for raw
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commodities and high rates for labor-intensive processed goods. The Commitment to Development Index measures the effect that rich country trade policies actually have on the developing world.

Control on capital
Capital controls are measures such as transaction taxes and other limits or outright prohibitions, which a nation's government can use to regulate the flows into and out of the country's capital account. Types of capital control include exchange controls that prevent or limit the buying and selling of a national currency at the market rate, caps on the allowed volume for the international sale or purchase of various financial assets, transaction taxes such as the proposed Tobin tax, minimum stay requirements, requirements for mandatory approval, or even limits on the amount of money a private citizen is allowed to remove from the country. There have been several shifts of opinion on whether capital controls are beneficial and in what circumstances they should be used. Capital controls were an integral part of the Bretton Woods system which emerged after World War II and lasted until the early 1970s. This period was the first time capital controls had been endorsed by mainstream economics. In the 1970s free market economists became increasingly successful in persuading their colleagues that capital controls were in the main harmful. The US, other western governments, and the international financial institutions (the IMF and WB) began to take an increasingly critical view of capital controls and persuaded many countries to abandon them. After the Asian Financial Crisis of 199798, there was a shift back towards the view that capital controls can be appropriate and even essential in times of financial crisis, at least among economists and within the administrations of developing countries. By the time of the 200809 crisis, even the IMF had endorsed the use capital controls as a response. In late 2009 several countries imposed capital controls even though their economies had recovered or were little affected by the global crisis; the reason given was to limit capital inflows which threatened to over-heat their economies. By February 2010 the IMF had almost entirely reversed the position it had adopted in the 80s and 90s, saying that capital controls can be useful as a regular policy tool even when there is no crisis to react to, though it still cautions against their overuse. The use of capital controls
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since the crises has increased markedly and proposals from the IMF and G20 have been made for international coordination that will increase their effectiveness. The UN, World Bank and Asian Development Bank all now consider that capital controls are an acceptable way for states to regulate potentially harmful capital flows, though concerns remain about their effectiveness among both senior government officials and analysts working in the financial markets.

Government procurement
Government procurement, also called public tendering or public procurement, is the procurement of goods and services on behalf of a public authority, such as a government agency. With 10 to 15% of GDP in developed countries, and up to 20% in developing countries, government procurement accounts for a substantial part of the global economy. To prevent fraud, waste, corruption or local protectionism, the law of most countries regulates government procurement more or less closely. It usually requires the procuring authority to issue public tenders if the value of the procurement exceeds a certain threshold. Government procurement is also the subject of the Agreement on Government Procurement, a plural lateral international treaty under the auspices of the WTO. Public procurement markets remain significantly closed to foreign participants as clearly illustrated by the problems highlighted in the US, China, Japan and Brazil. However, these markets are far from being negligible from a commercial point of view. The untapped potential is considerable. In 2007, public procurement spending amounted to some 16% of GDP in the EU, 11% in the US and 18% in Japan. For emerging and developing economies, data are scarce. In 2007, these government procurement markets were estimated to amount to around 212 billion in India and the Mercosur (Brazil and Argentina) put together. This may still be relatively small in absolute terms, but these markets are expected to increase significantly and are likely to become important future business opportunities in sectors where industry is highly competitive. However, public procurement is arguably the largest segment of trade that continues to be relatively sheltered from international commitments. Only 14 countries are parties to the Government Procurement Agreement (GPA). Only the US and Japan
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among the six strategic partners identified in this report are currently GPA members while China is in the process of negotiating its accession. Moreover, even those countries that have signed up to the GPA have negotiated important limits to their market opening commitments in the form of minimum thresholds or exclusions of sectors or entities (such as sub-federal). It is therefore no surprise that when the financial and economic crisis hit in 2008/09, a proliferation of protectionist measures in the area of public procurement was noted. Furthermore, the GPA is also characterized by an important asymmetry between what the different parties offer in terms of market access commitments, with the EU being much more open than the other parties. Clearly our trading partners have fallen short of reciprocity in this domain. For example, in 2007, the value of US procurement offered to foreign bidders in the GPA is just 34 billion and, for Japan it was 22 billion. This stands in sharp contrast to 312billion worth of the public procurement markets that the EU has committed to open. Thus, there is a strong case to push for more market access in public procurement, in particular with regard to our strategic partners that have not made reciprocal commitments. Efforts will need to be reinforced in order to increase international commitments be it through the on GPA negotiations and the extension of its membership, through the FTAs negotiated by the EU or through targeted bilateral actions.

Border & Immigration Controls

Border controls affect trade in goods. They can require the filling in of export/import forms and customs officers stopping vehicles and checking goods at the frontier. This can make time, add to traders transport costs and make goods less competitive in the foreign market. Many barriers remain to the movement of people. These include stringent visa requirements, quotas, requiring employers to search for a national employee before employing a foreign one, and refusal by the authorities to accredit foreign educational and vocational qualifications. Most countries in the triad have laws controlling the entry of foreigners. US immigration laws make it difficult for people to enter the USA to find work or to study and the policy got stricter after September 11, particularly for people from Muslim
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countries in the Middle East. The USA permits 675,000 immigrants each year. The law is aimed at keeping down the entry of unskilled workers, and attracting skilled workers and professionals. The EU and Japan both control immigration although these controls are under review given concerns that low birth rates and the aging of the population will cause shortage of workers. Migrants are seen as one part of the answer to this because they tend to be young and have a higher fertility rate than the indigenous population.

Technical standards and regulation can be formidable barriers. These are thousands upon thousands of different technical specifications relating to goods and services which can effectively protect domestic markets from foreign competition and consequently restrict trade. The EU has tried to deal with this through its Single Market programme. It uses the principle of mutual recognition whereby countries accept products from other member states so long as they do not constitute a danger to the consumer. But some products such as electric plugs, light bulbs and television do not lend themselves to this approach. Even if member states were to recognize other standards, the Continental two-prong plug could not be sold in the UK where the three-pin plug is the norm. Companies in the service sector can also be hampered by the myriad of technical standards and requirements. Financial institutions such as bank may find it difficult to use the internet to sell their services in foreign markets because countries may lay down different solvency requirements, or different levels of liquidity for financial institutions operating in their territory. Regarding rail transport, countries have different electrification and signaling systems making it difficult for foreign companies to enter and compete with domestic rail firms. Different national policies towards what are called intellectual property rights (IPRs) could constitute barriers as well. IPRs relate to ideas and knowledge that are an increasingly important part of trade. They can take a number of forms, for example, the invention of new products and production processes, brand names, logos as well as books and films. Firms who own these argue that they should have the legal right to prevent others from commercially exploiting them. However the extent of protection and enforcement of these rights vary widely around the world. Some countries such as China
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and Malaysia do not offer the firms creating the ideas and knowledge much protection against counterfeiting By all accounts it is very easy in Malaysia to obtain counterfeit versions of western music CDs, DVDs of popular firms made in USA, and designer goods branded with the names of Versace, Louis Vuitton and Rolex. Firms owning these IPRs argue that the lack of protection stunts their trade and FDI in those countries.

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3.7 Political Risk

The political environment and the risk of political or administrative expropriation of quasi-rents shape the design of firms international investment strategies. While political risk has been recognized in economics and managerial literatures as being an important factor in foreign investment decisions, little research examines how firms differ in their strategies for managing political risk. The common assumption is that political risk has a similar influence on investment strategy across all firms. Anecdotally, however, it appears that firms do differ in their responses to political risk, specifically in their propensity to enter relatively risky countries. Within the power generation sector, for example, foreign investment in politically hazardous environments is dominated by a small subset of multinational corporations; the vast majority of firms investing abroad in this industry, including many of the largest, choose to avoid the highest risk locations. Political Risk and Political Capabilities The risk of direct or indirect political expropriation is a concern for multinationals considering potential investments in many countries. In its broadest sense, political risk is the probability that the state will use its monopoly on legal coercion to renege on prior agreements with private firms in order to affect are distribution of rents among private and public sector actors. Political expropriation takes many forms, including forced renegotiations of contracts with public entities, avoidance of agreed commitments on tax benefits, unfavorable revisions of regulatory rules, and nationalization of privately-owned assets without due compensation, each of which reduces the financial returns from a given investment, ceteris paribus. In the same way that firms devise market-based strategies to shape the distribution of economic rents between competitors in the market place, firms also design non-market strategies to influence the political, administrative and judicial actors who govern the non-market environment. The growing literature on how firms design strategies specifically to manage and mitigate political risk draws naturally on research examining the institutional, political and economic sources of political risk.
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There are both macro- and micro-level political risks. Macro-level political risks have similar impacts across all foreign actors in a given location. While these are included in country risk analysis, it would be incorrect to equate macro-level political risk analysis with country risk as country risk only looks at national-level risks and also includes financial and economic risks. Micro-level risks focus on sector, firm, or project specific risk.

Political Risk
Macro level risk/Country specific risk Micro level risk/Firm specific risk

Global specific risk

Transfer Risk

Operational Risk

Cultural & Institutional risk

Interest rate risk

Bussiness risk

Foreign exchange risk

1] Macro-level political risk

Macro-level political risk looks at non-project specific risks. Macro political risks affect all participants in a given country. A common misconception is that macro-level political risk only looks at country-level political risk; however, the coupling of local, national, and regional political events often means that events at the local level may have follow-on effects for stakeholders on a macro-level. Other types of risk include government currency actions, regulatory changes, sovereign credit defaults, endemic corruption, war declarations and government composition changes. These events pose both portfolio investment and foreign direct investment risks that can change the overall suitability of a destination for investment. Moreover, these events pose risks that can alter the way a foreign government must conduct its affairs as well.

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Transfer Risk This risk arising from a decision by a foreign government to restrict capital movements. Restrictions could make it difficult to repatriate profits, dividends, or capital. Since a government can change capital movement rules at any time, transfer risk applies to all types of investments. It usually is analyzed as a function of a countrys ability to earn foreign currency, with the implication that difficulty earning foreign currency increases the probability that some form of capital controls can emerge. Quantifying the risk remains difficult because the decision to restrict capital may be a purely political response to another problem.

Transfer risk is defined as limitations on the MNEs ability to transfer funds into and out of a host country without restrictions. When a government runs short of foreign exchange and cannot obtain additional funds through borrowing or attracting new foreign investment, it usually limits transfers of foreign exchange out of the country, a restriction known as blocked funds. In theory, this does not discriminate against foreign-owned firms because it applies to everyone; in practice, foreign firms have more at stake because of their foreign ownership. Depending on the size of a foreign exchange shortage, the host government might simply require approval of all transfer of funds abroad, thus reserving the right to set a priority on the use of scarce foreign exchange in favor of necessities rather than luxuries. In very severe cases the government might make its currency nonconvertible into other currencies, thereby fully blocking transfers of funds abroad. MNEs can react to the potential for blocked funds at three stages. 1. Prior to making an investment, a firm can analyze the effect of blocked funds on expected return on investment, the desired local financial structure, and optimal links with subsidiaries. 2. During operations a firm can attempt to move funds through a variety of repositioning techniques. 3. Funds that cannot be moved must be reinvested in the local country in a manner that avoids deterioration in their real value because of inflation or exchange depreciation.

Operational Risk
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An operational risk is, as the name suggests, a risk arising from execution of a company's business functions. It is a very broad concept which focuses on the risks arising from the people, systems and processes through which a company operates. It also includes other categories such as fraud risks, legal risks, physical or environmental risks. The approach to managing operational risk differs from that applied to other types of risk, because it is not used to generate profit. In contrast, credit risk is exploited by lending institutions to create profit, market risk is exploited by traders and fund managers, and insurance risk is exploited by insurers. They all however manage operational risk to keep losses within their risk appetite - the amount of risk they are prepared to accept in pursuit of their objectives. What this means in practical terms is that organizations accept that their people, processes and systems are imperfect, and that losses will arise from errors and ineffective operations. The size of the loss they are prepared to accept, because the cost of correcting the errors or improving the systems is disproportionate to the benefit they will receive, determines their appetite for operational risk.

Cultural & Institutional Risk When investing in some of the emerging markets, MNEs that are resident in the most industrialized countries face serious risks because of cultural and institutional differences. Among many such differences are Differences in allowable ownership structures Differences in human resource norms Differences in religious heritage Nepotism and corruption in the host country Protection of intellectual property rights Protectionism

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Ownership structure Historically, many countries have required that MNEs share ownership of their foreign subsidiaries with local firms or citizens. Thus, joint ventures were the only way an MNE could operate in some host countries. Prominent countries that used to require majority local ownership were Japan, Mexico, China, India, and Korea. This requirement has been eliminated or modified in more recent years by these countries and most others. However, firms in certain industries are still either excluded from ownership completely or must accept being a minority owner. These industries are typically related to national defense, agriculture, banking, or other sectors that are deemed critical for the host nation. Even the United States would not welcome foreign ownership of large key defenserelated firms such as Boeing Aircraft.

Human resource norms MNEs are often required by host countries to employ a certain proportion of host country citizens rather than staffing mainly with foreign expatriates. It is often very difficult to fire local employees due to host country labor laws and union contracts. This lack of flexibility to downsize in response to business cycles affects both MNEs and their local competitors. It also qualifies as a country-specific risk. Cultural differences can also inhibit an MNEs staffing policies. For example, it is somewhat difficult for a woman manager to be accepted by local employees and managers in many Middle Eastern countries. The most extreme example of discrimination against women has been highlighted in Afghanistan while the Taliban were in power. Since the Talibans downfall in late 2001, several women have been suggested for important government roles. It is expected that the private sector in Afghanistan will also reintegrate women into the workforce.

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Religious heritage The current hostile environment for MNEs in some Middle Eastern countries such as Iran, Iraq, and Syria is being fed by some extremist Muslim clerics who are enraged about the continuing violence in Israel and the occupied Arab territories. However, the root cause of these conflicts is a mixture of religious fervor for some and politics for others. Although it is popular to blame the Muslim religion for its part in fomenting the conflict, a number of Middle Eastern countries, such as Egypt, Saudi Arabia, and Jordan, are relatively passive when it comes to jihads. Jihads are calls for Muslims to attack the infidels (Jews and Christians). Osama bin Ladens call for jihad against the United States has not generated any great interest on the part of moderate Muslims. Indeed one Muslim country, Turkey, has had a secular government for many decades. It strongly supported efforts to rid the world of bin Laden. Despite religious differences, MNEs have operated successfully in emerging markets, especially in extractive and natural resource industries, such as oil, natural gas, minerals, and forest products. The main MNE strategy is to understand and respect the host countrys religious traditions.

Nepotism and Corruption MNEs must deal with endemic nepotism and corruption in a number of important foreign investment locations. Indonesia was famous for nepotism and corruption under the now-deposed Suharto government. Nigeria, Kenya, Uganda, and a number of other African countries had a history of nepotism and corruption after they threw out their colonial governments after World War II. China and Russia have recently launched wellpublicized crackdowns on those practices. Bribery is not limited to emerging markets. It is also a problem in even the most industrialized countries, including the United States and Japan. In fact, the United States has an anti bribery law that would imprison any U.S. business executive found guilty of bribing a foreign government official. This law was passed in reaction to an attempt by Lockheed Aircraft to bribe a Japanese Prime Minister.

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Intellectual property rights Rogue businesses in some host countries have historically infringed on the intellectual property rights of both MNEs and individuals. Intellectual property rights grant the exclusive use of patented technology and copyrighted creative materials. Examples of patented technology are unique manufactured products, processing techniques, and prescription pharmaceutical drugs. Examples of copyrighted creative materials are software programs, educational materials (textbooks), and entertainment products (music, film, art).MNEs and individuals need to protect their intellectual property rights through the legal process. However, courts in some countries have historically not done a fair job of protecting intellectual property rights of anyone, much less of foreign MNEs. In those countries the legal process is costly and subject to bribery.

Protectionism Protectionism is defined as the attempt by a national government to protect certain of its designated industries from foreign competition. Industries that are protected are usually related to defense, agriculture, and infant industries.

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2] Micro-level political risk

Micro-level political risks are project-specific risks. In addition to the macro political risks, companies have to pay attention to the industry and relative contribution of their firms to the local economy. An examination of these types of political risks might look at how the local political climate in a given region may impact a business endeavor. Political risk is also relevant for government project decision-making, whereby government initiatives (be they diplomatic or military or other) may be complicated as a result of political risk. Whereas political risk for business may involve understanding the host government and how its actions and attitudes can impact a business initiative, government political risk analysis requires a keen understanding of politics and policy that includes both the client government as well as the host government of the activity.

Governance risks The most important type of governance risk for the MNE on the subsidiary level arises from a goal conflict between bona fide objectives of host governments and the private firms operating within their spheres of influence. Governments are normally responsive to a constituency of their citizens. Firms are responsive to a constituency of their owners and other stakeholders. The valid needs of these sets of constituents need not be the same, but governments set the rules. Consequently, governments impose constraints on the activities of private firms as part of their normal administrative and legislative functioning. Historically, conflicts between objectives of MNEs and host governments have arisen over such issues as the firms impact on economic development, perceived infringement on national sovereignty, foreign control of key industries, sharing or non sharing of ownership and control with local interests, impact on a host countrys balance of payments, influence on the foreign exchange value of its currency, control over export markets, use of domestic versus foreign executives and workers, and exploitation of national resources. Attitudes about conflicts are often colored by views about free enterprise versus state socialism, the degree of nationalism or international is present, or the place of religious views in determining appropriate economic and financial
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behavior. The best approach to goal conflict management is to anticipate problems and negotiate understandings ahead of time. Different cultures apply different ethics to the question of honoring prior contracts, especially when they were negotiated with a previous administration. Nevertheless, pre negotiation of all conceivable areas of conflict provides a better basis for a successful future for both parties than does overlooking the possibility that divergent objectives will evolve over time. Pre negotiation often includes negotiating investment agreements, buying investment insurance and guarantees, and designing risk-reducing operating strategies to be used after the foreign investment decision has been made. Interest rate risk Interest rate risk is the risk (variability in value) borne by an interest-bearing asset, such as a loan or a bond, due to variability of interest rates. In general, as rates rise, the price of a fixed rate bond will fall, and vice versa. Interest rate risk is commonly measured by the bond's duration. Asset liability management is a common name for the complete set of techniques used to manage risk within a general enterprise risk management framework. Interest rate risk has been shown to be particularly significant and particularly damaging for very large, one-off investment projects, so-called megaprojects. This is because such projects are typically debt-financed and are prone to end up in what has been called the "debt trap," i.e., a situation where due to cost overruns, schedule delays, unforeseen interest rate increases, etc. the costs of servicing debt becomes larger than the revenues available to pay interest on and bring down the debt.

Business Risk A company's risk is composed of financial risk, which is linked to debt, and risk, which is often linked to economic climate. If a company is entirely financed by equity, it would pose almost no financial risk, but, it would be susceptible to business risk or changes in the overall economic climate. All business transactions involve some degree of risk. When business transactions occur across international borders, they carry additional risks not present in domestic transactions. These additional risks, called
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country risks, typically include risks arising from a variety of national differences in economic structures, policies, socio-political institutions, geography, and currencies. Exchange rate risk Exchange Risk is an unexpected adverse movement in the exchange rate. Exchange risk includes an unexpected change in currency regime such as a change from a fixed to a floating exchange rate. Economic theory guides exchange rate risk analysis over longer periods of time (more than one to two years). Short-term pressures, while influenced by economic fundamentals, tend to be driven by currency trading momentum best assessed by currency traders. In the short run, risk for many currencies can be eliminated at an acceptable cost through various hedging mechanisms and futures arrangements. Currency hedging becomes impractical over the life of the plant or similar direct investment, so exchange risk rises unless natural hedges (alignment of revenues and costs in the same currency) can be developed.

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3] Global-specific risks
Global-specific risks faced by MNEs have come to the forefront in recent years. The most visible recent risk was, of course, the attack by terrorists on that win towers of the World Trade Center in New York on September 11, 2001. Many MNEs had major operations in the World Trade Center and suffered heavy casualties among their employees. In addition to terrorism, other global-specific risks include the antiglobalization movement, environmental concerns, poverty in emerging markets, and cyber attacks on computer information systems.

Terrorism & war Governance , rights & Future

Crisis planning


Globalspecific risks

Cross border chain supply integration


Anti globalization movements Environmental concerns

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Terrorism & war Although the World Trade Center attack and its aftermath, the war in Afghanistan and Iraq, have affected nearly everyone in the world, many other acts of terrorism have been committed in recent years. More terrorist acts are expected to occur in the future. Particularly exposed are the foreign subsidiaries of MNEs and their employees. As mentioned earlier, foreign subsidiaries are especially exposed to war, ethnic strife, and terrorism because they are symbols of their respective parent countries. No MNE has the tools to avert terrorism. Hedging, diversification, insurance, and the likes are not suited to the task. Therefore, MNEs must depend on governments to fight terrorism and protect their foreign subsidiaries (and now even the parent firm).

Crisis planning MNEs can be subject to damage by being in harms way. Nearly every year one or more host countries experience some form of ethnic strife, outright war with other countries, or terrorism. It seems that foreign MNEs are often singled out as symbols of oppression because they represent their parent country, especially if it is the United States. Resolving war and ethnic strife is beyond the ability of MNEs. Instead, they need to take defensive steps to limit the damage. Crisis planning has become a major activity for MNEs at both the foreign subsidiary and parent firm levels. Crisis planning means educating management and other employees about how to react to various scenarios of violence.

Cross border chain supply integration The drive to increase efficiency in manufacturing has driven many MNEs to adopt just-in-time (JIT) near-zero inventory systems. Focusing on inventory velocity, the speed at which inventory moves through a manufacturing process, arriving only as needed and not before, has allowed these MNEs to generate increasing profits and cash flows with less capital being bottled-up in the production cycle. This finely tuned supply chain

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system, however, is subject to significant political risk if the supply chain extends across borders.

Anti globalization movements During the past decade there has been a growing negative reaction by some groups to reduced trade barriers and efforts to create regional markets, particularly to NAFTA and the European Union. NAFTA has been vigorously opposed by those sectors of the labor movement that could lose jobs to Mexico. Opposition within the European Union centers on loss of cultural identity, dilution of individual national control as new members are admitted, over centralization of power in a large bureaucracy in Brussels, and most recently the disappearance of individual national currencies in mid-2002,when the euro became the only currency in 12 of the 15 member nations. The anti-globalization movement has become more visible following riots in Seattle during the 2001 annual meeting of the World Trade Organization. Antiglobalization forces were not solely responsible for these riots or for subsequent riots in Quebec and Prague in 2001. Other disaffected groups, such as environmentalists and even anarchists, joined in to make their causes more visible. MNEs do not have the tools to combat anti-globalism. Indeed, they are blamed for fostering the problem in the first place. Once again, MNEs must rely on governments and crisis planning to manage these risks.

Environmental concerns MNEs have been accused of exporting their environmental problems to other countries. The accusation is that MNEs frustrated by pollution controls in their home country have relocated these activities to countries with weaker pollution controls. Another accusation is that MNEs contribute to the problem of global warming. However, that accusation applies to all firms in all countries. It is based on the manufacturing methods employed by specific industries and on consumers desire for certain products such as large automobiles and sport vehicles that are not fuel efficient. Once again, solving environmental problems is dependent on governments passing legislation and implementing pollution control standards. In 2001, the Kyoto Treaty, which attempted to
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reduce global warming, was ratified by most nations, with the notable exception of the United States. However, the United States has promised to combat global warming using its own strategies. The United States objected to provisions in the worldwide treaty that allowed emerging nations to follow less restrictive standards, while the economic burden would fall on the most industrialized countries, particularly the United States.

Poverty MNEs have located foreign subsidiaries in countries plagued by extremely uneven income distribution. At one end is an elite class of well-educated, well-connected, and productive persons. At the other end of the spectrum is a very large class of persons living at or below the poverty level. They lack education, social and economic infrastructure, and political power. MNEs might be contributing to this disparity by employing the elite class to manage their operations. On the other hand, MNEs are creating relatively stable and well paying jobs for those who were otherwise unemployed and living below the poverty level. Despite being accused of supporting sweatshop conditions, MNEs usually compare favorably to their local competitors. For example, Nike, one of the targeted MNEs, usually pays better, provides more fringe benefits, maintains higher safety standards, and educates their workforce to allow personnel to advance up the career ladder. Of course, Nike cannot manage a countrys poverty problems overall, but it can improve conditions for some persons.

Cyber attacks The rapid growth of the Internet has fostered a whole new generation of scam artists and cranks that disrupt the usefulness of the World Wide Web. This is both a domestic and an international problem. MNEs can face costly cyber attacks because of their visibility and the complexity of their internal information systems. At this point in time, we know of no uniquely international strategies that MNEs can use to combat cyber attacks. MNEs are using the same strategies to manage foreign cyber attacks as they use for domestic attacks. Once again, they must rely on governments to control cyber attacks.

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Governance, rights & Future The first years of the twenty-first century have seen a rebirth in societys reflections on business. One of the most audible debates has been that regarding sustainable development, the principle that economic development today should not compromise the ability of future generations to achieve and enjoy similar standards of living. Although sustainable development initially focused on environmental concerns, it has evolved to include equal concerns which incorporate the ambition for a just and caring society.Although these debates have typically remained within areas of economic development, the debate in business circles has centered on corporate social responsibility.

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3.8 Taxation system

To tax is to impose a financial charge or other levy upon a taxpayer an individual or legal by a state or the functional equivalent of a state such that failure to pay is punishable by law. Taxes are also imposed by many sub national entities. Taxes consist of direct tax or indirect tax, and may be paid in money or as its labor equivalent often but not always unpaid labor. A tax "is not a voluntary payment or donation, but an enforced contribution, exacted pursuant to legislative authority" and is "any contribution imposed by government whether under the name of toll, tribute, tall age, gable, impost, duty, custom, excise, subsidy, aid, supply, or other name." Many developing and transition countries offer income tax incentives for investment. The incentives are most often for direct investors as opposed to portfolio investors, relate to real investment in productive activities rather than investment in financial assets, and are often directed to foreign investors on the grounds that there is insufficient domestic capital for the desired level of economic development and that international investment brings with it modern technology and management techniques. Developing and transition countries have introduced investment incentives for varying reasons. In some cases, especially in transition countries that have not reformed the socialist tax system, the incentives may be seen as a counterweight to the investment disincentives inherent in the general tax system. In other countries, the incentives are intended to offset other disadvantages that investors may face, such as a lack of infrastructure, complicated and antiquated laws, and bureaucratic complexities and weak administration, in the tax area or elsewhere. If these are the reasons, the appropriate solution is to reform the existing laws that create the problems and to build the necessary administrative capacities and infrastructure. This solution is often easier said than done, and so tax incentives may provide temporary relief until the more fundamental reforms have been carried out. Countries sometimes introduce incentives to keep up with other countries in competing for international investment. More rarely, tax incentives are introduced after other deficiencies in law and administration are remedied and are directed to areas of economic activity that the country wishes to develop. Although standard international tax policy advice cautions against the use of tax incentives for
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investment, many developing and transition countries, as well as many industrial countries, continue to operate or introduce them. Accordingly, this chapter briefly outlines the reasons why such incentives are often found to be unsuccessful and what the more important issues may be for encouraging investment in developing and transition countries. It then considers in more detail the design, drafting, and international taxation issues that such incentives present. Although the discussion considers investment incentives in general, it emphasizes foreign direct investment (FDI).

Relationship between Taxation and Investment

A. Tax and Nontax Factors Affecting Investment Investors often emphasize the relative unimportance of the tax system in investment decisions compared with other considerations. Firms first examine a countrys basic economic and institutional situation. While they are attracted to the potential markets in developing and transition countries and the relatively low-cost labor, other considerations inhibit large-scale investment, such as uncertainty in the policy stance of governments, political instability, and, in transition economies, the rudimentary state of the legal framework for a market economy. Tax incentives on their own cannot overcome these negative factors. To prospective investors, the general features of the tax system (tax base, tax rates, etc.) are more important than tax incentives. In transition countries, many tax laws contain provisions that are held over from the regime that was used under the former socialist economy. These provisions served purposes different from those of a market economy tax regime, for example, controlling the enterprises budget rather than determining an appropriate tax base. From the point of view of potential foreign investors, these provisions are unfamiliar and anomalous. They can cause the tax base to diverge from market economy norms (especially in relation to depreciation, business expenses, and loss carryovers) and impose taxation that is not consistent with reality from the point of view of business investors. Furthermore, taxpayers expect to be able to predict the tax consequences of their actions, which require clear laws that are stable over time. In many developing and transition countries, the tax laws are not clearly written and may be subject to frequent revision, which makes long-term planning difficult for businesses and adds to the perceived risk of undertaking major capital-intensive projects.

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The administration of the law is as important as the law itself, and it is clear that tax administrations in developing and transition countries often have difficulty coping with sophisticated investors, whether in providing timely and consistent interpretations of the law or in enforcing the law appropriately. Investors may view both income and nonincome taxes as potential problems. The latter are payable even if no profits are made and often raise the cost of basic inputs. In particular, social security taxes applied to the wages of expatriates in transition countries and border charges on the importation of capital equipment in developing and transition countries are seen as obstacles to investment. B. Lack of Success of Investment Tax Incentives The experience for developing and transition countries with tax incentives has been consistent with that of the industrial countries. Tax incentives have not by and large been successful in attracting investment, especially FDI. This underlines the conclusion that tax incentives cannot overcome the other, more fundamental problems that inhibit investment. At the same time, tax incentives have imposed serious costs on developing and transition countries that need to be considered relative to any modest benefits that they have conveyed. Tax incentives by their nature represent a revenue cost for the government. For the most part, this revenue cost is wasted because the incentives go to investments that would have been made in any event. It is argued that FDI in countries in transition to a market-oriented economy would not occur without the incentive, and so there is no real revenue cost. However, experience hash own that there is investment in short-term, high-profit projects. Because these projects would occur even if there were no tax incentives, the tax incentive is a pure windfall to them. Investment tax incentives have been subject to serious tax avoidance which has added greatly to their revenue cost. Tax avoidance results, in part, from the design of the incentives and also from the difficulties tax administrations face in auditing taxpayers. The revenue forgone in transition countries as a result of the use of tax incentives to shelter domestic income from taxation may well exceed the incentives earned through legitimate FDI. Tax incentives introduce complexity into the tax system, because the rules themselves are complex and because tax authorities react to the tax planning that inevitably results from their introduction by putting into place anti avoidance measures. This complexity
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imposes costs on administrators and taxpayers and increases the uncertainty of tax results. Uncertainty can deter the investment the incentives are intended to attract. Moreover, the introduction of tax incentives creates a clientele for their continuation and spread. The fact that many industrial countries maintain some tax incentives after the tax reforms of the 1980s is less a statement that they are considered to be effective and more a testament to the political difficulty in removing them once they have been introduced. It is because of this tendency that many temporary measures, designed to respond to particular perceived disincentives, remain in force long after the conditions that originally led to their introduction have changed. These costs can be observed fairly directly. What may be the primary cost, however, is much more difficult to observe and measure. The classic argument against the use of incentives is that they distort economic activity, by causing the after-tax pattern of returns to diverge from the before-tax pattern and thereby leading to an allocation of resources that differs from the efficient equilibrium the market is assumed to generate. Whether arguments based on advanced markets apply to developing and transition countries may be debated, but there can be no doubt that the more observable costs of tax incentives referred to above do arise in these countries. Why do countries enact tax incentives despite their drawbacks? There are many factors. Legislators may feel the need to do something to attract investment but may find it difficult to address the chief reasons that discourage investment; tax incentives are at least something over which they have control and which they can enact relatively easily and quickly. Alternatives to tax incentives may also involve the expenditure of funds, and tax incentives may be seen as apolitically easier alternative, since subsidies involving expenditure may undergo closer scrutiny as compared with other public expenditure needs. Further, some countries may feel under pressure from multinational companies, which threaten to locate investment elsewhere if they are not given concessions. Finally, some politicians or their advisors may simply disagree with the analysis presented here. As can be seen, the topic is a complicated one and cannot be resolved here. Therefore we focus more on the technical tax issues raised by investment incentives and on ways that such incentives can be designed so as to minimize the damage that they can cause.

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3.9 Double Taxation Avoidance Agreement (DTAA)

Introduction Every country seeks to tax the income generated within its territory on the basis of aspects like residence of taxable entity, source of income, Permanent Establishment and so on and so forth. Double taxation may be delineated as the imposition of taxes on income or capital in more than one country on the same tax payer, relating to the same income or capital for the same tax year. Double taxation may arise when an individual or an entity has connections with more than one country. Such double taxation is one of the major impediments to the development of inter-country economic relations. Double tax Avoidance Agreements comprise of consensus between two countries aiming at elimination of double taxation. Double Taxation Avoidance Agreements between two countries would focus on mitigating the incidence of double taxation. It would promote exchange of goods, persons, services and investment of capital among such countries. These are bilateral economic agreements wherein the countries concerned assess the sacrifices and advantages which the treaty brings for each contracting nation. What is DTAAs? An individual who earned income has to pay income tax in the country in which the income was earned and also in the country in which such person was resident. As such, the liability to tax on the aforesaid income does arise in the country of source and the country of residence. In order to avoid the hardship of double taxation, Government of India has entered into Double Taxation Avoidance Agreements with several countries. DTAAs taken care of technical know-how and service fees reduced rates of tax on dividend, interest, and royalties received by residents of one country from other. When the rate of tax is higher in the Indian Income Tax Act, 1961 than the rate prescribed in the DDTA, then the rate prescribed in the DDTA shall be applied i.e. the rate which is better to the taxpayer would be applied.

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Aim of DTAAs The need and purpose of tax treaties were indicated by the Organization for Economic Co-operation and Development in the Model Tax Convention on Income and on Capital as standardization and common solutions for cases of double taxation to the taxpayers who are engaged in industrial, financial or other activities in other countries. Firstly, treaties must help in avoiding and alleviating the burden of double taxation prevailing in the international arena. The tax treaties must clarify and help the taxpayer to know with certainty of his potential tax liability in other country where he is carrying on industrial or other activities. Tax Treaties must ensure that there is no discrimination between foreign tax payers who has permanent establishment in the source countries and domestic tax payers of such countries. Treaties are made with the aim of allocation of taxes between treaty nations and the prevention of tax avoidance and/or tax evasion. The treaties must also ensure that equal and fair treatment of tax payers having different residential status, resolving differences in taxing the income and exchange of information and other details among treaty partners. Classification of DTAAs Double taxation avoidance agreements may be classified into Comprehensive agreements and Limited agreements based on the scope of such agreements. Comprehensive Double Taxation Avoidance Agreements provide for taxes on income, capital gains and capital investments whereas Limited Double Taxation Avoidance Agreements denote income from shipping and air transport or legacy and gifts. Comprehensive agreements ensure that the taxpayers in both the countries would be treated on equitable manner in respect of the problems relating to double taxation.

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Treaty Benefits

To avail the benefits of tax treaty, an individual must be a resident of a contracting country and corporate entity should have a permanent establishment in a contracting state. In such case only the benefits like lower withholding tax would accrue to those tax payers on interest, dividend or royalty receipts.

Residential status of a person is important in determining tax liability both under domestic tax laws and under international tax laws. Normally, tax treaty clarifies how to determine a residential status of a person to tax him as a resident under the respective taxation laws of the contracting state. A relief from double taxation may be sought only by the resident of that contracting state. The term resident of contracting state means a person either an individual or a corporate, which is liable to tax under the laws of a particular country on account of domicile, place of permanent business establishment, residence or any other similar criteria.

Permanent Establishment
One of the important terms that transpire in all the Double Taxation Avoidance Agreements is the term 'Permanent Establishment (PE). It was not been defined in the Income Tax Act, 1961. However, as per the Double Taxation avoidance agreements, Permanent Establishment includes a wide variety of arrangements. Double taxation avoidance agreements usually restrict the jurisdiction of the contracting states to taxing income of a foreign enterprise only if such enterprise carries on business in another country through permanent establishment. It is a fixed place of business through which business activities of enterprise is wholly or partially conducted in that country for generation of income. Section 92F of the Indian Income Tax Act, 1961 explains the term Permanent Establishment (PE) as a fixed place of business through which the business of the enterprise is wholly or partly carried out. OECD and UN model conventions also provide
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for definition of the term permanent establishment as it includes a place of management, a branch, an office, a factory, a workshop etc. There is an international accord on the attribution of profits earned by Permanent Establishment on the basis of Separate Enterprises concept and the relevance of the arm's length principle. Business Income The business income of a non-resident is taxable in India under the provisions of Indian Income Tax Act, when it accrues either directly or indirectly, through any business connection in India, or source of income or assets located in India or through the transfer of an Indian capital asset. Only the residents of a contracting state can avail of the benefits of the relevant treaty. Moreover, terms and conditions of all the treaties entered into by a State are not uniform. By and large, Double taxation avoidance agreements assign jurisdiction with respect to a right to tax a particular income. The principle underlying tax treaties is to share the revenues between two countries. DTAA - Current Scenario in India The Indian Income Tax Act, 1961 administrate the taxation of income accrued in India. As per Section 5 of the Income Tax Act, 1961 residents of India are liable to tax on their global income and non-residents are taxed only on income that has its source in India. Recently, Mr. Pranab Mukherjee, finance minister of India had asked the ministry of finance to review all the 77 double taxation avoidance agreements (DTAA) that the government had signed so far. The review is being done in order to comply guidelines of Organization for Economic Co-operation and Development (OECD) on sharing information on flow and parking of black money in various countries and to fulfill Indias commitment at the G-20 Nations summit. OECD has blacklisted over 25 nations for tax relaxations they offer for parking funds. These include Mauritius, Cyprus, Switzerland and the Netherlands. Tax havens allow easy parking of money either through investments or deposits. They may offer a

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range of incentives including a nominal capital gains tax for companies to complete financial secrecy of accounts held by individuals and corporate. DTAAs are obviously an interaction of two tax systems each belonging to different country, which intend to mitigate the effect of double taxation. Double taxation is still one of the major obstacles to the development of inter-country economic relations. Every country seeks to tax the income generated within its territory on the basis of one or more connecting factors. By means of Double Taxation Avoidance Agreements, each country accommodates the claims of other nations within their fiscal arena to develop international trade and investments with minimal barriers. Double tax Avoidance Agreements comprise of consensus between two countries aiming at elimination of double taxation. It would promote exchange of goods, persons, services and investment of capital among such countries. Very recently, Indian Finance Minister had asked his ministry to review all the 77 double taxation avoidance agreements (DTAA) that the Government of India had signed so far. The review is being done in order to comply guidelines of Organization for Economic Co-operation and Development (OECD) on sharing information on flow and parking of black money in various countries and to fulfill Indias commitment at the G-20 Nations summit. In the article, entire scope of DTAA was analyzed vis--vis in the back drop of current scenario prevailing in India.

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Chapter No.- 4

Collection & Analysis of Data

This survey conducted by 40 selected respondents. Questions are regarding to the international investment and its obstacles. 1) Are you familiar with the term International Investment?
100.00% 90.00% 80.00% 70.00% 60.00% 50.00% 40.00% 30.00% 20.00% 10.00% 0.00% Yes No Yes No

Comment From 40 respondents of survey 90.63% people admit that they aware about

international investment & 9.37% people admit that they have no knowledge of international investment.

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2) If you want to make an investment in foreign market which market will you prefer?

Preferance for Investment

Developed Market Emerging Market Both

27% 40%


Comment - From 40 respondents of survey the 33% people agree that they would prefer

developed market, 40 % people gave preference for emerging market and remaining 27% a concept that they would prefer both market. 3) Will you consider risk factor before investing in foreign market or in securities?
120.00% 100.00% 80.00% 60.00% 40.00% 20.00% 0.00% Yes No Yes No

Comment - From 40 respondents of survey the 97% accept that they will consider risk

factor in foreign investment and only 3% claimed that they will not consider it.

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4) Suppose if you are an investor then which economic factor do you consider to investing in foreign securities?

Economic factor consideration

16% Micro Economic Factor Macro Economic Factor 58% 26% Both

Comment - From 40 respondents of survey only 16% people admit that they would

consider micro economic factor and 26% will consider for macroeconomic factor while 58% people prefer to give importance both economic factors rather than any one of them while doing an investment.

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5) If you are an investor then which type of securities do you prefer in foreign market?

Preference for securities

7% Equity Debentures 52% 7% 4% Commodity Bond All of the above


Comment - From 40 respondents of survey 52% people gave preference to equity ,4% for

debentures,7% for commodities,30% for bond & remaining 7% people give preference to all type of securities. 6) Will you estimate the Foreign Exchange Risk in your investment?
100.00% 90.00% 80.00% 70.00% 60.00% 50.00% 40.00% 30.00% 20.00% 10.00% 0.00% Yes No Yes No

Comment - From 40 respondents of survey 90% people admit that they will estimate

forex risk while doing an international investment and remaining 10% will not give importance for forex risk.
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7) Will you take detail information about foreign market before investing in it?
120.00% 100.00% 80.00% 60.00% 40.00% 20.00% 0.00% Yes No Yes No

Comment - From 40 respondents of survey, There is 100% response by people that they

will take full information before doing an investment in foreign securities. 8) Suppose if you are an investor then what will your decision on securities during recession period in foreign market?

Decision during Recession

15% 47% 38% Buy Hold Sell

Comment - From 40 respondents of survey, 47% people prefer to buy securities in foreign

market and 38% gave preference to hold it remaining 15% chose sell option.

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9) Do you think Foreign Direct Investment is beneficial for Indian Economy?

80.00% 70.00% 60.00% 50.00% 40.00% 30.00% 20.00% 10.00% 0.00% Yes No Can't say Yes No Can't say

Comment - From 40 respondents of survey, 75% people accept that Foreign Direct

Investment is beneficial for Indian Economy but 3.13% not admit about this while other 21.88% claimed that they do not sure about beneficiaries of FDI. 10) Will you able to file the tax of foreign countries when you will make investment in there securities?
70.00% 60.00% 50.00% 40.00% Yes 30.00% 20.00% 10.00% 0.00% Yes No No

Comment - From 40 respondents of survey, 59.38% people claimed that they will be able

to file the tax of foreign countries if they are making investment in there securities. remaining 40.62% claimed that they will not able to file the tax.
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11) Which region do you prefer to make an investment outside India?

Preference for reigon to make an investment

7% 22% 24% 6% 2% North America Latin America Europe Africa Asia Australia


Comment - From 40 respondents of survey, 22% people gave preference for North

America for making an investment after that Latin America got 6% preference, 39% for Europe, 2% for Africa, 24% for Asia & 7% for Australia. 12) Suppose if you are an investor then what will your decision for investment depend upon the regulation of market in foreign securities?
100.00% 80.00% 60.00% Yes 40.00% 20.00% 0.00% Yes No No

Comment - From 40 respondents of survey, 90.63% people gave importance of

regulations of foreign market while they make decisions on investment in foreign securities remaining 9.63% claimed that they would not importance for regulations of foreign market.

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13) Do you think Global specific risks like Global Terrorism, Anti- Globalization movements investment?
80.00% 70.00% 60.00% 50.00% 40.00% 30.00% 20.00% 10.00% 0.00% Yes No Can't say







Yes No Can't say

Comment - From 40 respondents of survey, 75% agree that Global specific risks make

obstacles in international investment and only 3.13% not agree about this remaining 21.87% people admit that they do not sure about this.

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14) If you are an investor on which risk do you give more importance while making investment in foreign market

Imporatance to several Risks

17% 19% 25% FOREX Risk 20% 19% Interest rate Market risk Change in Government policy Inflation risk

Comment - From 40 respondents of survey, 20% gave importance for forex risk, 19% for

interest rate risk, 25% for market risk, 19% for government policy and remaining 17% people admit that they will give importance for inflation risk while making investment in foreign market. 15) Have you experienced or known the specific risk which affected to your own investment?
80.00% 70.00% 60.00% 50.00% 40.00% 30.00% 20.00% 10.00% 0.00% Yes No Yes No

Comment - From 40 respondents of survey, 68.75% people confess that they know about

specific risk or experienced it while making an investment remaining 31.25% didnt admit about this

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Do you think International Investment is more risky than investment in

domestic market?
90.00% 80.00% 70.00% 60.00% 50.00% 40.00% 30.00% 20.00% 10.00% 0.00% Yes No Yes No

Comment - From 40 respondents of survey, 81.25% people agree for that the international

investment is more risky than the domestic investment and other 19.75% respondents do not agree it. 17) Do you think risk and investment cannot be separated?
90.00% 80.00% 70.00% 60.00% 50.00% 40.00% 30.00% 20.00% 10.00% 0.00% Yes No Can't say

Yes No Can't say

Comment - From 40 respondents of survey, 78.13% people admit that the risk and

investment cannot be separated they are related with each other but 12.50% people do not admit this and remaining 9.37% respondents claimed that the they are not sure about this.

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18) Do you feel that people should encourage to make investment in foreign securities?
80.00% 70.00% 60.00% 50.00% 40.00% 30.00% 20.00% 10.00% 0.00% Yes No Can't say Yes No Can't say

Comment - From 40 respondents of survey, 68.25% people accept that there is need to

encourage others towards investment in foreign securities while 9.37% claimed that there is need to encourage and 21.88% are not sure.

19) Despite risk, can international investment is beneficial for you in the era of Globalization?
80.00% 70.00% 60.00% 50.00% 40.00% 30.00% 20.00% 10.00% 0.00% Yes No Can't say Yes No Can't say

Comment - From 40 respondents of survey, 75%people admit that international

investment is beneficial for society in the period of Globalization while 6.25% claimed that it is not beneficial to them and remaining 18.75% respondents are not sure about this.
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20) Which step do you consider that Government of India should take for increase in Foreign investment?

Opinions for several steps

2% DTAA 23% 34% Liberlise economic policies

28% 13%

Accept participation in various types of business. Develop good infrastructure and create business environment

Comment - From 40 respondents of survey, 34% respondents gave preference for need of

good infrastructure and to create business environment for the purpose of increase foreign investment in a country while 28 % claimed that government should apply liberalized economic policies, 23% gave preference for Double Taxation Avoidance Agreement (DTAA) ,13% claimed that the government should accept foreign investment in various types of business and remaining 2% people prefer other options.

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21) Do you think world institutional organizations like IMF, World Bank, OECD should undertake new policies that can make foreign investment safe?
100.00% 90.00% 80.00% 70.00% 60.00% 50.00% 40.00% 30.00% 20.00% 10.00% 0.00% Yes No Yes No

Comment - From 40 respondents of survey, 93.75% people admit that there is need to

undertake new policies by world institutional organization to the provide safety in foreign investment while remaining 6.25 % people claimed that there is no need of new policies for safety foreign investment.

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Chapter No.- 5 Interpretation of data

In the era Globalization we are familiar with international business. It is effect of LPG (Liberalization, Privatization, and Globalization) policy by which we are aware about International Investment. From the last two decades emerging markets have been growing rapidly than developed markets. Emerging markets have potential to make profitable investment but there are many risk factors and barriers both in emerging markets & developed market. In case of risk, there are some important risks which consider by investors such as, market risk, foreign exchange risk, interest rate risk, government policies & inflation risk. Equities are still popular among investors than commodities, bonds & derivatives because easy transfer and knowledge make it more liquid instrument than others. In recession period, investors prefer to buy or hold security rather sell it. Many emerging & developed markets are located in mainly three continents namely North America, Asia & Europe. Along with risks investor also consider several barriers such as foreign exchange rates, information barriers regulatory barriers & taxation barriers. As a investor opinions these barriers can make its effects on foreign investment and we can understand that they are aware about barriers & risk. However risk & investment cannot be separated and in case of foreign investment there is much risk than domestic investment. Despite all risks & obstacles, there is need to encourage people towards foreign investment because it can be beneficial for us in this globalization era. Government of India should take appropriate measures that increase foreign investment in a various country. Along with this there is need to undertake new policies by world institutional organizations like IMF,OECD & other which can eliminate obstacles in International Investment.

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Chapter No.- 6 Conclusion

International investment has become a need for every country which wants to develop their economy. After the fall of Soviet Union the term International investment has arisen in the world. From the last two decades of Globalization this phenomenon made a vast change in peoples lifestyle, needs, purchasing power and also its effect on infrastructure & financial system of many countries both developed and underdeveloped. In case of investors view international investment is not easy as domestic investment. They have been facing many hurdles while they are doing investment whether it is foreign direct investment (FDI) or Portfolio investment in foreign markets. There are three common risks which considered by investors while doing international investment such as Correlation between International & Domestic markets, Higher costs to investment & Investors psychology of foreign countries. Other than investor Multinational companies (MNCs) also faced barriers in foreign direct investment such as Political risk, Capital control risk, Foreign exchange risk (Exposure), Regulatory system & Taxation. Apart from that, they also faced the Information Asymmetry which includes adverse selection & moral hazard. Despite Obstacles, international investment can be beneficial for both developing & developed countries. Now- a- days, developing countries like India & China consider as a major competitors in world economy but Indian government need to take a positive steps such as Participation of foreign investment, Develop good infrastructure & business environment etc. towards increase foreign investment. In case of precaution investors have to keep an eye on capital flow, trends, new policy & environment in foreign market. It is generally considered that If investment is there must be risk. Apart from this they have to be aware about barriers in investment it will their investment decisions on investment. From the last two decades of globalization, financial market has made a sensitive place for investment whether it is domestic or foreign.

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Chapter No.- 7 Suggestions & Recommendations

- Following are some of the suggestions in order to remove barriers in international investment: Investors have to take precaution & knowledge before making investment in foreign securities. Investors and MNCs should study about various risks which arise in a foreign market. Investors have to keep detail information about foreign market by various mediums such as, newspapers, news channels & Internet. It will prevent information asymmetry between two parties. As a sensitive place for investment, investors and MNCs both have to aware about new trends in foreign investment. Government should minimize tariff and subsidies in international trade along they have to maintain political instability that enables foreign investment in a country. World institutional organizations like IMF, OECD, UNCTAD, World Bank have to undertake new policies that cam make safety in foreign investment. Investors have to update their information about investment. -Following are some of the recommendations in order to eliminate obstacles in international investment: In case of India, government should develop good infrastructure & create business opportunities for foreign investors along with that they have to signed DTAA agreement with many countries. Countries should minimize capital control and accept foreign participation in various types of business along with that they have to eliminate corruption & other related problems. Countries should give tax benefits to foreign investors, FIIs & MNCs. There is need of accounting system and law for international investment at a global level. Along with risk awareness, investors and MNCs have to undertake risk management techniques such as, Foreign exchange risk management, Assessment of Political, Taxation & Regulatory risk

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Appendices Questionnaire
Name: Occupation: 1) Are you familiar with the term International Investment? Yes No

2) If you want to make an investment in foreign market which market will you prefer? Developed Market Emerging market Both

3) Will you consider risk factor before investing in foreign market or in securities? Yes No

4) Suppose if you are an investor then which economic factor do you consider to investing in foreign securities? Micro economic factor Macro economic factor Both

5) If you are an investor then which type of securities do you prefer in foreign market? Equity Debentures Commodity Bond

All of the above 6) Will you estimate the Foreign Exchange Risk in your investment? Yes No

7) Will you take detail information about foreign market before investing in it? Yes No

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8) Suppose if you are an investor then what will your decision on securities during recession period in foreign market? Buy Hold Sell

9) Do you think Foreign Direct Investment is beneficial for Indian Economy? Yes No Cant say

10) Will you able to file the tax of foreign countries when you will make investment in there securities? Yes No

11) Which region do you prefer to make an investment outside India? North America Australian continent 12) Suppose if you are an investor then what will your decision for investment depend upon regulation of market in foreign countries? Yes No Latin America Europe Africa Asia

13) Do you think Global specific risks like Global Terrorism, Anti- Globalization movements; Environmental Concerns makes obstacles to international investment? Yes No Cant say

14) If you are an investor on which risk do you give more importance while making investment in foreign market Foreign Exchange Risk Interest Rate Risk Market Risk

Change in government economic policy

Inflation Risk

15) Have you experienced or known the specific risk which affected to your own investment?

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16) Do you think International Investment is more risky than investment in domestic market? Yes No

17) Do you think risk and investment cannot be separated? Yes No Cant say

18) Do you feel that people should encourage to make investment in foreign securities? Yes No Cant say

19) Despite risk, can international investment is beneficial for you in the era of Globalization? Yes No Cant say

20) Which step do you consider that Government of India should take for increase in foreign investment? Double tax avoidance agreement with many countries Liberalize economic policy Accept participation in various types of business Develop good infrastructure and create business environment Other 21) Do you think world institutional organizations like IMF, World Bank, OECD should undertake new policies that can make foreign investment safe? Yes No

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Books:1) Investments (second edition) Tata Mcgraw Hill Jack Clark Francis, Richard .w. Taylor. 2) Foreign Exchange Practice, Concepts & Control Sultan Chand & Sons C.Jeevanandam. 3) Investments (eigth edition) Special Indian Edition ZviBodie, Alex Kane, Alan J Marcus, PitbusMohanty. 4) Global Business Himalaya Publishing House- V.A.Avdhani. 5) Global Capital Market- Vipul Prakashan Dipak Abhyankar.

Websites:1) 2) 3) 4) 5) www.

Newspaper: Mint Times of India June 19,2011 June 23,2011 September 28,2011

Economic Times -

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