1. In a Venn Diagram, differentiate FDI (left) and FPI(right). In the center, write the similarities of the two.

 Direct investment is the category of

 Portfolio investment includes
international investment in which a resident
investments by a resident entity in one
entity in one country obtains a lasting interest
country in the equity and debt securities
in an enterprise resident in another country. A
 Foreign of an enterprise resident in another country
lasting interest implies the existence of a long-
Investment which seek primarily capital gains and do not
term relationship between the direct investor
 Both are necessarily reflect a significant and lasting
and the enterprise and a significant degree of
important interest in the enterprise. The category includes
influence by the investor on the management
foreign capital. investments in bonds, notes, money market
of the enterprise. The criteria used to
 Crucial to global instruments and financial derivatives other than
distinguish direct investment from other types
trade those included under direct investment, or in
of investment is that “a direct investment is
 Contributes other words, investments which are both below
established when a resident in one economy
economic boost the ten per cent rule and do not involve affiliated
owns 10 percent or more of the ordinary
and stimulates enterprises. In addition to securities issued by
shares or voting power, for an incorporated
employment enterprises, foreigners can also purchase
enterprise, or the equivalent, for an
sovereign bonds issued by governments.
unincorporated enterprise” . All subsequent
According to the IMF’s 1996 Coordinated
transactions between affiliated enterprises,
Portfolio Investment Survey Guide the essential
both 2 incorporated and unincorporated, are
characteristic of instruments classified as
also classified as direct investment
portfolio instruments is that
transactions. Direct investment is divided into
they are traded or tradable.
equity capital, reinvested earnings, and other
capital.
2. In the Philippines, many countries like China and some countries in Europe deliberately seek investment in our infrastructure
thru the Build, Build, Build Program. Should they be worried about their investment to us?

- As an investor, you should always secure the wealth and growth of your investment. These Countries mentioned above are the
countries that known to be experts about business and investment. I think they don’t need to be worried about their investment
here in the Philippines, because Philippines have these following strong points that the investors must consider. First, the Philippines
has skilled young English-speaking workforce it is easy for them to communicate and compete globally. Second, the Philippines has a
large domestic market (with a population of over 103 million people) this factor is one of the indicators on how much will the
investor gain from his/her investment. . Third, it has a getaway to the other countries in the region facilitated by the country’s
membership in ASEAN. Lastly, the Philippines have an economy that has successfully integrated enterprise outsourcing (BPO). These
following factors attract the foreign investors to invest in our country. known to be experts about business and investment. I think
they don’t need to be worried about their investment here in the Philippines.

3. Why should countries pay careful attention to the location advantages when investing abroad?
- Countries should pay attention to the location advantages because it allows them to know if their investment is secured or if it is
risky or not. Location advantages shows first, the size of the domestic market—measured by GDP, per capital income, or size of the
middle class—and potential for growth are key influences on investment location decisions. Second the availability of skilled labor
and wage-adjusted labor productivity, by this we can estimate if the business will perform very well and if it were be going to be a
competitive one. Third is the infrastructure especially the availability of electricity, water, transportation, and telecommunication,
rather than their costs in influencing FDI location decisions, this serves as the fuel of the business were you’re investing. Lastly is the
predictability and stability of the tax system, this would be a big consideration before you are going to invest in abroad. Knowing all
of these location advantages would allow the investors to come up with the best decision.