Types Of A Business And Investment Owned By Foreign Investors

The topic of discussion is Expropriation. In layman’s terms this is when a host government confiscates the use or ownership of a business/investment owned by foreign investors. There are two forms of expropriation, direct and indirect and either can be seen as legal or illegal depending on the actions taken by the host state. (Nikiema, S. 2012) When a government seizes the assets illegally it is known as confiscation. (International Law) â€Å"Every state has the sovereign right to expropriate assets in its territory assuming it meets certain conditions such as: not to be discriminatory against the investor, be for a public purpose, in accordance with due process of law, and full compensation in one form or another.† (Francis, Y. 2012) In today’s global economy illegal forms of expropriation are becoming more and more prevalent. There are many pros and cons to setting up shop on foreign soil. Many companies establish subsidiaries throughout the world to reap the benefits of lower tax brackets. With benefit however, comes large risk, such as expropriation. There are a number of ways investors or managers can mitigate the risks of expropriation, but before discussing what those are it’s best to understand the factors behind expropriation. Why do governments expropriate? There are a number of different factors that play a part in the development of possible expropriation but here are four to consider: The economic status of the expropriating state; the ability of an act ofShow MoreRelatedAttracting Foreign Direct Investment ( Fdi ) Essay1284 Words   |  6 PagesAttracting Foreign Direct Investment (FDI) is an important objective of every economy that has long-term goals of economic welfare. FDI increases the host country’s wealth as well as it encourages economic growth if certain condition s are met. 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