What is the purpose for foreign investment regulations


What is the purpose for foreign investment regulations?

List and discuss the foreign investment regulations.

What are 2 issues that concern management when screening potential markets and sites?

List and discuss the steps in the screening process.


With increasing globalization, cross border transactions are becoming essential to companies and more companies are expanding their operations worldwide thus leading to the emergence of more and more Multi National Corporations. This calls for more foreign investment regulations that are aimed at protecting both the MNCs and the local industries. MNCs are known to shift their operations into countries that offer cheap labor and those that provide cheap production facilities, foreign investment regulations prevent such exploitative practices.



International business refers to commercial transactions between nations. Foreign investments are therefore investments of organizations or corporations outside their home countries. Companies that have operations in foreign countries are known as multi national corporations. Foreign investment regulations are the rules that govern such investments in foreign countries. The report explores the purpose of these regulations, the regulations in place, and the concerns and steps in screening potential markets.

What is the purpose of foreign investment regulations?

The major purpose of foreign investment regulations is to safeguard the operations of companies in foreign countries, by ensuring that profits made in these countries flow to the companies without any restrictions (Sornarajah, 2010).

The regulations are also important in safeguarding the interests of local industries such that local industries are not deprived of their ability to earn maximum income from their operations and that their potential to grow is not restricted by the overbearing operations of MNCs.

If there were no foreign investment regulations then MNCs would shift their operations to countries that would offer them cheap labor and those which provide cheap production facilities. This practice benefits such companies while taking advantage of those host countries.

List and discuss the foreign investment regulations.

Some of the foreign investment regulations include:

Foreign regulations require international companies to obtain Investment licenses: This is to say that like the local companies, international companies also require permits to be able to operate in their chosen area of interest. They therefore have to be issued with Licenses by the investment license approval authority before they can commence business (Nguyen & Thanh, 1997).

The foreign regulations also requires international companies to comply with the laws and rules of the country they operate in.: This means that once a company decides to go international, it must be ready to adopt the host countries laws and they should also learn to cope with the culture of the people in that country.

They also require home countries governments’ to support foreign investments. The foreign investments should be promoted provided that they are set up in the best interests of the home country’s population.

Other regulations include; International companies should be able to pay taxes in the same way that local companies do, the companies are allowed to transfer their assets under foreign exchange legislations and also any foreign projects should commence within period authorized, among others.

What are 2 issues that concern management when screening potential markets and sites?

Management is mainly concerned with keeping the costs low and maximizing profits (Fish & Kelly, 2006).

By keeping costs low, management tries to cut down on marketing, production and distribution costs. This is only possible if management invests in markets that offer such opportunities.

If management manages to keep costs low then consequently profits are maximized provided sales revenue is at a higher level than costs.
List and discuss the steps in the screening process.

The screening process involves:

Identification of potential markets: This involves detection of the various markets that an international company would wish to venture into. Countries that offer little opportunities are eliminated while countries that offer potential markets are considered (Fish & Kelly, 2006).

Evaluation of potential markets: After countries that offer little opportunities are eliminated those that offer sufficient opportunities are then assessed on the basis of cost, culture, economy, political stability, market size and market attractiveness.

Selection of the markets: After the evaluation process, countries; which offer low costs, have almost similar cultures, have a growing economy, which are politically stable, offers a large market and those that have little or no competition are chosen.


            Even though the foreign investment regulations seek to regulate foreign operations, some regulations are too stringent and sometimes they restrict growth and development of the countries where such regulations apply.


Fish, Kelly, E. (2006). An Artificial Intelligence Approach to International Market Screening. San Bernadino: International Information Management Association.

Nguyen, Thanh. (1997). New foreign investment law implementing regulations. Washington: William C Hearn.

Sornarajah, M. (2010). The International law on foreign Investment. Cambridge University press.

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