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Ownership and control of foreign direct investment : India and Canada Sharma, Kavita A.

Abstract

The aim of this thesis is to examine issues pertaining to ownership and control of foreign direct investment in two countries, India and Canada. The first is a developing country with a broad industrial base. The second is a developed country which is still essentially resource-exporting inspite of its sophisticated technology and industry. A plea has been made for international regulation of foreign direct investment in order to make it a truly effective tool of economic growth and development. The costs and benefits of foreign direct investment have been examined in Chapter 1 with special emphasis on developing countries. Attempts have been made in various international forums to develop a mechanism to regulate foreign direct investment. UN has made the most comprehensive effort with the appointment of the Group of Eminent Persons in 1972. Their recommendations and the accompanying comments have been discussed to highlight the divergence of views between developing and developed countries. The impact of colonization on developing countries with its consequent problems like formation of resource-based economies has been discussed in Chapter II. Canada being a largely resource-exporting economy inextricably linked with USA has several parallels with developing countries. In Chapter 3 I have discussed the historical background of foreign direct investment in India and its perceived costs. Provisions of Foreign Exchange Regulation Act, 1973 have been examined to assess India's attempts to regulate foreign direct investment. Chapter 4 has dealt with the role of foreign direct investment in Canadian economy and its perceived costs and benefits. Foreign Investment Review Act, 1973 and Investment Canada Act, 1985 have been analysed to understand Canada's attempts at regulation of foreign direct investment. The Draft Code of Conduct produced by the UN Comission on Transnational Corporations has been discussed in Chapter 5. Areas of international agreement and disagreement have been classified and possible solutions seen to make this a universally acceptable code. I have concluded that it would be beneficial to adopt a universally acceptable international code of conduct. This can eventually acquire the force of customary international law and provide guidelines for national legislation to make foreign direct investment an effective tool in economic development.

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