Foreign investment is one of the major stimuli to the economic growth of developed countries. Interest foreign investment by multinational companies has been generated by the growing importance and necessity of foreign investment for quickly evolving and economic stability in the developing countries. The difference between other forms of investments and foreign direct investments that FDI is to acquire what implications are there for the multinational corporation that experiences delays for sometimes many years in the repatriation of cash flow.FDI is also the investment of a corporation’s capital in another country.FDS are usually very important in the convergence of countries that neighbor the advanced western European countries and also the major determinant of the economic growth of a country. This essay will investigate how attractive is the investment climate in Bulgaria for foreign investments. Bulgaria offers a unique investing climate to foreign investors but at the same time, it has its obstacles, barriers, and disadvantages.
The process of privatization has influenced the foreign direct investments in transition economies. The low levels of FDI in early 1997 was due to the countries instability and the slow economic, institutions and political reforms. In 1997 the countries FDI increased than the past five years. This was due to the high number of companies that had invested in the country choosing to take part in privatization, while others chose to expand. The investment that set preferential treatment measures for investing created a good climate for investment.
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The country protects its balance of payment today by ensuring that it has a favorable regulatory environment for foreign direct investment such as allowing investors to have low taxation of corporate. In Bulgaria, there is no restriction on transactions of foreign currency. There are also double taxation treaties that have a number of jurisdictions. Bulgaria protected its balance of pay net by ensuring that they produced agriculture products and therefore reducing the import of these products. The company also financed its industries and develops the industries so as to ensure that the industrial goods were no longer imported but rather they imported them to other countries.
A project's cash flow and associated risk can be hard to measure. Such investments can vary from parents and subsidiary point of view (Moran, 2012). The concepts of taxes and subsidiary should be examined that are related to a company investment subsidiary should be considered. The existence of different taxes can complicate the cash flows received by the parents since the taxable income can increase. If a project of five years cash flows are blocked annually by the host country, there may be a normal or superior return of the subsidiary but the parent ay show no return at all. While for a project with longer life after cash flows have been blocked for some few years the cash flows can also contribute to the parent's returns.
Factors such as the type of investment and firm size are crucial in a company’s decision to venture into a foreign country. The companies usually assess the financial and economic components of that countries risk and also the determinants of foreign direct investments. However, most countries do not have the systems to measure the host countries risks. The individual project risk assessment is a major part of foreign investment decision-making process.
References
Moran, T. H. (2012). Foreign Direct Investment. John Wiley & Sons, Ltd.
