Foreign Investment: Key Terms You Need To Know

There has been a significant growth in foreign investment recently because of the numerous benefits it brings to the market. This article by Thao & Co. provides detailed information about foreign investment in Vietnam.

What is foreign investment?

Foreign investment refers to the allocation of capital by an investor into projects of a foreign country with the aim of generating profits. This kind of investment helps boost economic growth and paves the way for foreign businesses to thrive.

Glossary of Key Terms in Foreign Investment

To gain a detailed insight into foreign investment, it’s essential to familiarize yourself with the following key terms:

1. What is foreign investment capital?

Foreign investment capital is the capital poured into another country to expand infrastructure, business models, or develop other projects in the recipient country.

Based on the business model, the foreign capital will be allocated accordingly. However, the ultimate goal of this capital movement is to achieve the desired financial returns.

2. Who are foreign investors?

Foreign investors are individuals or organizations that invest in projects outside their home country. This investment can generate substantial profits.

Learn more: How to obtain an investor visa for foreigners in Vietnam

3. What are foreign-invested enterprises (FIE)?

Foreign-invested enterprises are companies that receive capital from foreign investors to finance and conduct their operations. They must conduct their activities in accordance with the host country’s law while still retaining the right to supervise and manage the businesses.

4. What is a foreign-invested economy?

This is an economic sector funded by investors from other countries. By providing capital, the investors will be entitled to establish and manage businesses in the host country.

5. What is foreign indirect investment?

Investors can engage in foreign indirect investment by purchasing shares and securities of foreign companies. While indirect investment won’t grant them the right to directly manage or operate the businesses, the main purpose still lies in generating financial returns. Learn more: What is a Global Citizen? Examples and Essential Skills

6. What is net foreign investment?

The value difference between foreign investments made by a country’s residents and domestic investments made by foreign residents is called net foreign investment. The comparison is typically measured over a specific period, usually a year.

7. What is Foreign Direct Investment (FDI)?

Foreign direct investment is also referred to as FDI. When the investor makes a direct investment, the capital will be used to establish manufacturing facilities and enterprises abroad. This way, the investment could be sustained for the long term, and the investor can take on the role of a direct supervisor of the business. Related article: Internationalization vs. Globalization: Is there any difference?

Opportunities and challenges of foreign investment

As foreign investment has become more widespread, the challenges it brings in are undeniable. Recognizing these challenges and turning them into opportunities for growth can lead to long-term success. Here’s an overview of the key opportunities and challenges of foreign investments:

Opportunities

1. 📈 Economic growth: The recipient country can utilize the capital from foreign investors to scale the business and stimulate economic development.
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3. ⚙️ Technology transfer: The host country not only receives funds but also absorbs state-of-the-art technologies from developed countries. Thanks to this, the productivity and managerial effectiveness of the businesses are upgraded.
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5. 💼 Career opportunities: Expanding businesses will eventually lead to increased demand for employment and a rise in job opportunities.
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7. 🌐 Economic integration: The recipient country get the chance to blend in with the global market and strengthen international cooperation.
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9. 🛣️ Infrastructure improvement: Foreign capital can also be directed to make improvements on streets, drainage facilities, harbors, and airports. Infrastructure forms the backbone of a country’s development, so these improvements are basically changes for the better.

Challenges

1. 📌 Overreliance on foreign capital: Excessive dependence on foreign capital may lead to the loss of the host country’s financial independence.
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3. 💸 Transfer pricing: Transfer pricing can be overused to minimize tax liabilities, thereby affecting the host country’s state budget in a negative way.
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5. 🧠 Brain drain: Foreign-invested companies will attract high-quality local talents, upsetting the market’s competitive balance and causing labor shortages for domestic enterprises.
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7. ♻️ Environmental pollution: Some companies and manufacturers’ production activities can cause environmental degradation.
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9. ⚠️ Competitive edge over domestic companies: Domestic companies may face several challenges and difficulties when competing with foreign-invested businesses.

Trustworthy translation partner on your global investment journey

Foreign investment cooperation involves parties from different countries, so international communication plays a crucial role in this. Investors must pay close attention to languages and information exchange to ensure a smooth process.

Contracts must be handled with utmost care, and documents must be translated accurately, so there won’t be any future mistakes or disagreements. Besides, professional interpretation for business negotiations and precise translation of business documents are needed to achieve success.

Therefore, finding a professional translation partner is essential to help you navigate those complexities. Accurate translation ensures you can yield the desired outcome and avoid legal pitfalls.   Currently, it’s not difficult to find a translation partner, but there are certain factors to consider:

1. ✨ Experience: Experts who are specifically well-versed in your business field will assist better with your projects.
2. ✨ Qualifications: You should rely on qualified translators with certifications meeting international standards.
3. ✨ Creditability: Checking clients’ feedback on social media platforms and search tools will give you information about a translation company’s credibility.
4. ✨ Confidentiality: Investment projects often require strict confidentiality policies for utmost protection.
5. ✨ Price range: It’s necessary to compare prices between companies beforehand. Prioritize agencies that help you save costs and ensure quality at the same time.

To guarantee a pleasant experience and translation efficiency for your investment project, Thao & Co. is your perfect companion.

Our services have been praised by clients for the exceptional quality and affordable prices. Click on Contact Us to receive a free consultation today!