Foreign Capital And Foreign Aid In Economic

Finance Foreign Capital: Foreign capital can enter a country in the form of private capital and or public capital. Private foreign capital may take the form of direct and indirect investments. (i) Direct Investment: It means that the concerns of the investing country exercise de facto or de jure control over the assets created in the capital importing country by means of that investment direct investments may take many forms: The formation m the capital importing country of a subsidiary of a .pany of the investing country; the formation of a concern in which a .pany of the investing country has a majority holding: the formation in the capital importing country of a .pany financed exclusively by the present concern situated in the investing country: setting up a corporation in the investing country for the specific purpose of operating in the other concerns; or the creation of fixed assets in the other country by the nationals of the investing country. Such .panies or concerns are known as transnational corporations (TNCs) or multinational corporations (MNCs). (ii) Indirect investment: It is better known as ‘portfolio’ or ‘rentier’ investment consists mainly of the holding of transferable securities (issued or guaranteed by the government of the capital importing country), shares or debentures by the nationals of some other country. Such holdings do not amount to a right to control the .pany. The shareholders are entitled to the dividend only. In recent years, multilateral indirect investments have been evolved. The nationals of a country purchase the bonds of the World Bank floated for financing a particular project in some LDC (Less Developed Country). Kinds of Public Foreign Capital: (a) Bilateral hard loans i.e., giving of loans by the British Government in pounds sterling to the Indian Government. (b) Bilateral soft loans i.e.. sale of food grains and other farm products to India by the United States. (c) Multilateral loans i.e., contributions to the Aid India Club, the Colombo Plan. etc., by the member countries. Under this category are also included loans made available by the various agencies of the United Nations like the IBRD, IFC, IDA, SUNFED, UNDP, etc. (d) Intergovernmental grants. Foreign Aid refers to public foreign capital on hard and soft terms, in cash or kind, and intergovernmental grants. Foreign Aid: Public foreign capital is more important for accelerating economic development than private foreign capital. The financial needs of LDCs are so great that private foreign investment can only partially solve the problem of financing. For one thing, it has nothing to do with social expenditures in such sphere as education, public health, medical programmes, technical training and research, etc. Such schemes though indirect contributing to economic efficiency and productivity of the economy in the long-run yield no direct returns, and could, therefore, be financed with the help of grants received from advanced countries. Further, private foreign investment presupposes the existence of basic public services in LDCs. But investment in them requires large sums and risks which private capital is unable to undertake. So investment in low-yielding and slow-yielding projects could be possible only on the basis of foreign aid. Moreover, unlike private foreign investment, aid can be used by the recipient country in accordance with its development programmes. Therefore, much cannot be expected of private foreign investment. There is however, a growing international awareness that poverty anywhere is a danger to prosperity everywhere and prosperity anywhere must be shared everywhere. Developed countries consider it to be their moral duty to help their less fortunate brethren in underdeveloped countries. But this realization on the pan of the developed countries has never been spontaneous. They have always been motivated by international policies in the context of the cold war. Their aim has been to give aid with "strings" attached. "It was only with the entry of the Soviet Union and other .munist countries into the field that western countries also began displaying some enthusiasm for offering aid to the underdeveloped countries at the governmental level without strings". Foreign aid flows to the LDCs in the form of loans, assistance and outright grants from various governmental and international .anizations. It is regarded indispensable for the development of LDCs. But there are some economists who dispute this view and hold that foreign aid is not indispensable for their development rather it obstructs it We study the case for and against foreign aid. About the Author: 相关的主题文章: