Theme: Contents and forms of International Economic Relations Xodjamqulov Shahboz. Mm-54i Questions: Introduction

Official capital is funds of the state budget or the budget of international organizations (IMF, the World Bank, etc.), which move abroad or from abroad according to the decisions of governments or intergovernmental organizations. Its source is money of taxpayers.
Private capital is funds of private firms, banks and other non -state organizations, which are provided in the form of investment, commercial loans, interbank crediting.
The forms of international capital movements are defined in the investment and banking laws of each country.
In economic sense, an investment is the purchase of goods that are not consumed today, but are used in the future to create wealth. In finance, an Investment is a monetary asset purchased with the idea that the asset will provide income in the future or will later be sold at a higher price for a profit. In other words, Investment is to riskly investing money for one business for taking more profit in the future.
By the purpose of investment, capital is divided into direct and portfolio investment.
Direct investment is capital investment in order to acquire control over the object of allocation of capital. It is mainly export of private business capital.
Portfolio investment is capital investment in foreign securities without the right of control over the investment object. It is mostly export of private business capital as well.
Foreign direct investment is carried out in the form of transfer of capital from one country to another by means of crediting or buying the shares from a foreign company, which is largely owned by the investor or under his control, or by means of setting up a new business. Therefore, foreign direct investment tends to imply a high level of investor commitments to the controlled firm in relation to transferring of new technologies, managerial know-how, the provision of the skilled stuff.
Foreign Direct Investment(FDI) has a special place among the forms of international capital movements. This is due to the following two main reasons:

1. 
   Foreign direct investment is a real investment, which, unlike portfolio investment, is not purely financial assets denominated in the national currency. It is invested in business, land and other capital goods;
   
2. 
   Foreign direct investment, unlike portfolio investment, usually provides a managerial control over the object of the invested capital.
   

Foreign direct investment is a kind of foreign investment, intended to invest in production and to provide the control over the activities of enterprises by means of acquisition of a controlling interest. Foreign direct investment covers all types of investment, either buying new shares, or simple crediting, if only an investing firm holds more than 10% interest in a foreign company.
One important question economists have preoccupied themselves with regarding FDI is why ownership of domestic resources could be more profitable for foreign firms than for domestic firms. Giving my own opinion, rhe firth thing I should mention is that foreign firms have greater knowledge and expertise regarding product methods, which gives it a chance to over domestic firms. The acquision of a foreign firm could be based on a World business strategy. And moreover, foreign firms might use a differnt discount rate or return on investment, which are essentially cost “of capital” considirations, when evaluating investment opportunities.

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