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Market Risk

Market Risk: (also known as systematic risk) the risk that relates to the entire investment class that involves financial variations an example of which can be a recession and other main event that can affect the worth of key sectors in the pecuniary market . The successes and failures of attracting foreign investment Countries around the world compete fiercely to attract foreign direct investment (FDI). Policymakers, especially those in developing countries, hope that FDI inflows will bring much needed capital, new technologies, marketing techniques and management skills.

Foreign investment is expected to create jobs and increase the overall competitiveness of the host economy. Technological progress which allows firms to split various stages of the production process, declines in transport and communication costs, increasing openness of countries to foreign capital, and international trade have increased the attractiveness of spreading the production chain across various geographic locations.

This phenomenon has led to a spectacular increase in global FDI flows thus giving more countries an opportunity to become part of the global production chains. But it has also increased intensified competition for FDI. In response, many countries have set up investment promotion agencies (IPAs) as a key part of their strategy to attract foreign investors,

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there are more than 160 IPAs at the national level and over 250 at the sub national level. This is a relatively new phenomenon as only a handful of these agencies existed 20 years ago.

In 2004, the total spending of the 82 IPAs that reported their budget figures in the recent IPA Census reached almost a billion dollars; a quarter of this amount was spent specifically on investment promotion. In addition, some IPAs are empowered to provide support in the form of tax holidays or other quasi fiscal measures. The main purpose of investment promotion is to reduce the costs of FDI by providing information on business conditions and opportunities in the host economy and by helping foreign investors cut through bureaucratic procedures.

Investments promotion activities encompass: advertising, investment seminars and missions, participation in trade shows, one to one direct marketing efforts, facilitating appointments of potential investors, matching potential investors with local partners, assistance in obtain consent and approvals, preparing project proposals, conducting feasibility studies and servicing investors whose projects have already become operational.

As obtaining information on investment opportunities in developing countries tends to be more difficult than gathering data on industrialized economies, investment promotion should be particularly effective in a developing country context. How inward investment promotion works? Investments promotion can affect the choice of foreign investment site at all stages of the decision-making process. A process of a site selection usually starts with drawing a long list of potential host countries.

The long list typically includes 8 to 20 countries which can be thought of as belonging to three groups: (I) most popular FDI destinations in the world, (ii) countries close to the existing operations of the investor, and (iii) emerging FDI destinations (that is, countries that the investor may not be initially very serious about but which represent “out of the box” thinking). The inclusion of the third category presents an opportunity for IPAs to increase the chances of their country being on list via advertising, trade shows or pro active contacting of potential investors.

The long list is then narrowed down to about 5 potential sites based on the trade off between costs and the quality of business environment. As this is usually done without visiting sites under consideration, the accessibility of the information about potential host countries plays a crucial role. IPAs that provide up to date, detailed and accurate data on their websites and IPAs that are willing to spend time preparing detailed answers to investors’ inquiries and customize these answers to the needs of an individual investor can increase the chances of their countries being included in the short list.

Investor’s visit to the host country, which is the next step in the process, gives IPAs the opportunity to emphasize the advantages of locating in their country, answer questions, show off potential investment sites and facilitate contacts with local business community. IPAs can also play a role in the final stage of the process by providing information on investment incentives and offering help with the registration process. Does it work? (Appendix 1, answer)

What does the research for policy mean? The observations have two policy implications. . Investments promotion is a viable policy option for developing countries that have a sound business climate and wish to attract FDI inflows. In the presence of knowledge externalities associated with FDI, well documented in the recent literature, subsidizing provision of information is an appropriate policy action. . Regional competition in tax incentives point to potential benefits of regional coordination.

The Federal Law According to the international citizen website, Dubai Law does not permit banks to repossess homes if mortgage payments are not maintained. There are also no eviction laws present. This may cause people to think that there is no security because lenders have no hold against the client if mortgage repayments are not made. In other words, investors could think that if more lending is made, more people would be able to buy and the market could go up.

However, since this is not the case, the potential for a further growth in the market is extinguished. There are two financial institutions that could help in buying properties; these are Dubai Islamic Bank and Amlak. However, because of the sharia law, these financial institutions would not let an investor buy a property using mortgages. Sharia system is rather than telling investors to pay a mortgage, investors pay on a lease back basis. At the end of the lease, investors buy the property for 1 dirham from the bank.

Another aspect of the law that the investors can look into is the idea that they only hold a right regarding the property but they are not allowed to own the property. In a nutshell, Dubai government still owns the property. The international citizen website further concluded that the Foreign Investors who really likes to invest in Dubai are putting a lot of faith in the economic situation of the country. In order to gain investment, these investors get a local to sign their names on the ownership deed, according to a entrepreneur that the website stated in their report.

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