Effectiveness of Foreign Portfolio Investment with regard to Multinational Corporations in the Long Run

Abstract

This study was conducted to exploretheapplicationofPortfolio Investments in situations where Foreign Direct Investment (FDI), although stable, does not seem to be compatible with the conductofMultinationalcorporations within a country. In this study the research question that appears would be, “Is it possible to use portfolio investment by multinational corporations in the long run when direct investment is chosen to be withdrawn?”. This study aims to discuss variousbenefitsandascertainthe effectiveness of the Portfolio Investment by including world examples of developing countries and at the same time investigates the position of portfolio investment by the statepartiesandthemultinational corporations when difficulties arise on FDI in the long run. To collect data for the study, secondary data will be gathered using the Black Letter method. FDI and Portfolio Investment are two different types under InternationalInvestmentLaw.FDIis covered bycustomary international law whereas Portfolio is not. While FDI tends to be more stable, Portfolio measures up to it by having benefits with regards to income, liquidity etc. This study mainly analyzes the situationsinMalaysiaandIndia.In conclusion, after analyzing the positive and negative aspects of both types of Investment, it can be when difficulties arise with FDI, the use of portfolio Investment can help mitigate issues that arise. It is recommended for developingcountriestomakeuseof PortfolioInvestmentinamoreliberal manner to take advantage of its benefits for the further development of the country's economy.