ABSTRACT
This chapter sits at a slight tangent to the others in this volume, with its primary focus on foreign portfolio investment (FPI), rather than foreign direct investment (FDI). 1 In this regard, foreign investors tend to be financial institutions, rather than manufacturing or other kinds of service companies; and the recipients of the capital inflows tend to be relatively well-established local companies, rather than newly established foreign-invested entities. In their most stereotypical forms, a multinational company investing in a joint venture or wholly owned ‘greenfield’ FDI project is a markedly different exercise than a fund manager taking a minority equity stake in a domestic company that is listed on the local stock market. However, this sort of distinction is becoming increasingly less common, as the fine line between FDI and FPI begins to blur, such as in the structuring and financing of cross-border mergers and acquisition (M&A) deals. In the course of a single cross-border M&A deal, for example, the acquiring company may initially take a stake in the acquiree company by buying some of its shares listed on the local stock market, before making a full acquisition bid, possibly financed in part by bank credit from either local or overseas commercial banks. The end result is a foreign-invested enterprise operating in the host country (possibly using both local and foreign funds as leverage), but the means of enactment is unlike the ‘plain vanilla’ FDI activity that Southeast Asian countries – and their investment promotion agencies – are most familiar (and perhaps most comfortable) with.
