1. International
Business
Reported by
Angelito L. Estrada
Dr. Paul Raymundo
Professor

2. Introduction

3. Foreign Direct Investment
Reported by:
Angelito Leccio Estrada

4. Point 1
Point 2
Point 3
What is
Foreign Direct
Investment?

5. Who is Concerned about FDI?
• Government
• Competitors
• Suppliers and Customers
• Managers and Workers

6. Government
Competitors
Suppliers and customers
Managers and Workers

7. Strategy of Foreign Direct Investment

8. Supply Side
• Lower Production Costs
• Lower Delivery Costs
• Acquisition of Raw Material
• Offshore Assembly or Foreign Sourcing
• Portfolio of Production Sources
• Access to Technology and Skills

9. Demand Side
• New Market
• Restriction of Export
• Local Presence
• Buy “National” Rules
• Good Corporate Citizen
• Response to Rivals’ Threats

10. Patterns of Foreign Direct Investment
• The Pattern by Country

11. Trends in Foreign Direct Investment (FDI)

12. Direct Investment by Company
Since ultimately we are concerned about the firms that
engage in FDI, let us turn finally to a view of the companies
most heavily involved in this activity. Studies carried out
during the past two decades have regularly found that the
most important direct investors are large, technology-
intensive firms from the main industrial countries.
Direct Investment by Company

13. The world's top 10 non-financial multinational corporations by Trans nationality
Index as calculated by the United Nations Conference on Trade and
Development in 2008
Company Home country Industry Percent
Xstrata United Kingdom Mining & quarrying 93.2
ABB Ltd. Switzerland and Sweden Engineering services 90.4
Nokia Finland Electrical & electronic equipment 90.3
Pernod Ricard SA France Food, beverages and tobacco 89.1
WPP Group United Kingdom Business services 88.9
Vodafone Group Plc United Kingdom Telecommunications 88.6
Linde AG Germany Chemicals 88.3
Anheuser-Busch InBev Belgium Food, beverages and tobacco 87.9
Anglo American United Kingdom Mining & quarrying 87.5
ArcelorMittal Luxembourg Metal and metal products 87.2

14. Foreign Direct Investment in the
United States

15. Who Invests The Most in the US ?
Knowing, then, that foreign investment in the United States is normal, what
countries today invest the most in the United States, and how much?
Inflow FDI reached what the U.S. Department of Commerce calls a "historical
peak" in 2008 with total foreign investments of $328 billion. Investments in 2000
nearly reached that point, but fell to a low of $64 billion in 2003. (Think of how
policies effect investment potential: in 2003 the U.S. had endured 9/11, was in a
war in Afghanistan, and was just starting one in Iraq.)
Investments rebounded to the 2008 level, but fell after the Great Recession began
late that year. Inflow FDI in 2009 was about $140 billion; in 2010 it was back up to
$194 billion, and inflow in about $228 billion in 2011.

16. Major Foreign Investors in the US
Current Trends
• The top investors in the U.S. in 2010 were Switzerland, about $37
billion; United Kingdom, about $33 billion; Japan, about $22 billion;
France, $21 billion; Germany, $20 billion; Luxembourg, $12 billion; the
Netherlands, $12 billion; and Canada, about $9 billion. Those countries
accounted for 84% of total inflow FDI in 2010.
• In fact, those countries traditionally make up the "Top Eight" foreign
investors in the U.S. Over the past two decades, they have continually
made up 80% to 84% of total inflow FDI.

17. Where Does The U.S. Invest?
• Outflow FDI -- U.S. overseas investments -- totaled
nearly $330 billion in 2010. The Netherlands, United
Kingdom, Canada, Luxembourg, Bermuda, and Ireland
received just over 50% of that investment.

18. FDI in the Philippines

19. Foreign Direct Investment Statistics in the Philippines
Table 1: Foreign Direct Investment Stock (US Millions)
2007 2008 2009 2010
FDI Stock 20,463 21,746 22,931 26,319
FDI Stock as % of GDP 13.7 12.5 13.6 13.2
Source: Philippine Central Bank (Bangko Sentral ng Pilipinas)

20. Table 2: Net Foreign Direct Investment Flows By Investor Country (US Millions)*
2007 2008 2009 2010
Japan 824.37 59.39 626.09 243.38
Hong Kong 13.29 144.72 408.2 215.55
United States 655.91 220.07 714.90 205.51
Singapore -2.39 130.57 16.42 41.74
Republic of Korea 14.46 31.20 14.48 7.24
Germany 16.03 18.30 2.87 7.03
Switzerland 1.95 1.17 2.00 6.69
Taiwan/ROC 0.09 6.51 1.34 0.40
Malaysia 5.96 0.99 2.22 0.28
Denmark -0.01 0.36 0.17 0.12
China -0.12 -0.16 -3.30 -0.05
United Kingdom 74.77 298.17 0.45 -25.56
Netherlands -3.38 170.74 -21.75 -110.69
*Ranked by 2010 flows
Source: Bangko Sentral ng Pilipinas (Central Bank)

21. Table 4: 2010 Top Foreign Investors in the Philippines
Name of Company Country of Origin Equity (est.)(US Millions)
The AES Corporation United States 930.0
SunPower Philippines Manufacturing Ltd. United States 837.23
Texas Instruments (Philippines), Inc. United States 800.51
Amkor Technology Philippines, Inc. United States 558.95
Coral Bay Nickel Corp. Japan 514.3
Rohm Electronics Philippines, Inc. Japan 453.38
Kepco Ilijan Corp. South Korea 437.22
Republic Cement Corp. France 422.3
Dole Philippines, Inc. United States 359.46
TeaM Energy Corp. Japan 347.49
Chevron Malampaya LLC United States 332.41
Source of Data: Philippine Securities and Exchange Commission; Business World’s Top 1,000 Corporations in the
Philippines, Volume 25 (BusinessWorld Publishing Corporation, 2011); Company reports

22. Table 3: Net Foreign Direct Investment Flows by Industry/Sector (US Millions)
2007 2008 2009 2010
Manufacturing 548.64 311.87 887.79 -2.04
Electricity, Gas, and Water 699.18 224.73 389.58 -14.82
Financial Intermediation -22.61 215.70 237.45 46.61
Real Estate 137.66 158.27 89.13 181.52
Construction 50.36 171.85 79.15 -1.57
Services 42.33 -11.51 18.03 112.34
Hotels/Resto 2.60 5.65 14.86 105.67
Transport, Storage, and
Communications
12.78 -27.02 7.26 106.31
Mining and Quarrying 154.56 154.88 6.19 277.50
Trade/Commerce 4.59 22.23 4.21 21.47
Agriculture 3.71 0.67 0.17 1.72
Source: Bangko Sentral ng Pilipinas (Central Bank)

24. Stage 1: Introduction
Stage 2: Growth
Stage 3: Maturity
Stage 4: Saturation
Stage 5: Decline
Explanation of Foreign Direct Investment Process
International
ProductCycle

26. Dunning’s Eclectic View
• The eclectic paradigm is a theory in economics and is also
known as the OLI-Model or OLI-Framework. It is a further
development of the internalization theory and published
by John H. Dunning in 1980.
• Internalization theory itself is based on the transaction cost
theory. This theory says that transactions are made within
an institution if the transaction costs on the free market are
higher than the internal costs. This process is
called internalization.

27. Ownership
Advantages
One
Location
Advantages
Two
Internalization
advantages
Three
For Dunning, not only the structure of organization is important. He added 3 more factors
to the theory:

28. Internalization advantages
Source:
Dunning (1981)
Categories of advantages
Ownership
advantages
Internalization
advantages
Location
advantages
Form of
market entry
Licensing Yes No No
Export Yes Yes No
FDI Yes Yes Yes
Trade and FDI patterns
for industries and countries.
Location advantages
Strong Weak
Ownership
advantages
Strong Exports Outward FDI
Weak Inward FDI Imports

29. Other Explanation for FDI
INTERNALIZATIONDISINVESTMENTCONCLUSION

30. QUESTIONS/COMMENTS

31. Thank you for
listening!
Angelito L. Estrada