International Financing
Nowadays, absorption of financial resources and varying forms has
turned into a prerequisite for achievement of development goals, and with
regard to the special status of many developing counties it is not possible to
easily supply the capital required for implementation of great projects;
therefore, the alternative way out, i.e., absorption of foreign capitals has
been greatly welcome in such countries. Foreign investment is defined as
applying foreign capital in the activities whose risk of capital return and its
interests is borne by the investor.
The important role of foreign investment is in financing and
providing the required financial resources and acting as the supplement to
local financial resources. Entry of foreign capitals to a country is highly
advantageous to the target country’s economy and industry, in addition to the
supply of capital and financial resources. Advanced technology, specialty,
technical knowhow and management systems require entrance of foreign capital to
the host country for boosting the investors’ profits, and they encourage
foreign countries to have more strong presence in the world economy and trade.
Foreign Financing Methods
According to a general classification, foreign financing methods
can be divided into two categories: borrowing and non-borrowing, and they are
distinguished mainly by trading risks guaranteeing procedure, as well as the
Government’s role and obligations in covering such category of risks.
A)
Making use of foreign capitals via borrowing
methods:
The investee country receives
a loan from the loan-providing country or institute. Then, the investee country
is liable to make repayment of such loan to the loan provider by installments.
Some of such methods include:
1)
Finance
2)
Refinance
3)
Usance
4)
Buyer’s credit
5)
International loans
Some of features of borrowing methods are as follows:
1)
All of relevant risks of the plan are borne by
the financial resources recipient and the Government
2)
Repayment of all received resources, interest
and incurred costs is guaranteed the Government (hence, all credit risks are
assumed by the Government)
3)
Repayment of the loan is dependent on the
implementation of the plan or failure of the same)
4)
Granting loan (often) is subject to making
purchase machinery and services from the producers and providers of the
loan-granting country
5)
Being of uncertain of properly using of the
received resources
6)
It has negative effects on financial credit
indices of the Country and balance of payments, and weakens the potential of
receiving loans from abroad by the Government
B)
Making use of foreign capitals via non-borrowing
methods:
By this method, the supplier
of financial resources (investor) expects return of principal and interest of
invested resources from the economic performance of the plan upon accepting the
risk in applying the financial resources in the intended activity or plan. The
methods of investment are carried out in following forms:
1)
Foreign direct investment
2)
Non-equity modes of investment
3)
Concession agreement
4)
Foreign portfolio investment
Foreign investment may be divided into two categories in respect
of executive status of the new or existing project as the destination of
foreign capital absorption:
-
Investment in new projects (green field), i.e.,
setting up and creating a totally new activity in the target country.
-
Acquisition and merger of an existing entity in
the country
Some of features of non-borrowing methods are as follows:
1)
Trading risks are born by the foreign investor
and his local partner, and political risks are assumed by the Government
2)
The government only assumes the damages due to
the Government’s interventions (confiscation, nationalization, set rules and
regulations which are directly detrimental to the investment, infringement of
contracts and obligations of the Government)
3)
The capital is retuned after implementation of
the plan and its showing profit from earrings due from its sales of products
4)
Competitive international tender may be held to
make sure of optimal investment of financial resources and its efficient
management by the private sector
5)
The received resources are definitely used due
to the investor’s interests and supervision by Foreign Investment Board and
Investment Organization
6)
It have positive effects on financial credit
indices and balance of payments of the country and encourages entry of more
foreign capital
Services
One of our major specialties and services is to supply the
required foreign exchange of plans and projects of Iranian companies via
international investors. Amin Nikan Afagh Investment Advisory Company, being
supported by the knowledge and operational experiences of its specialists and
also through its strategic communications with reputable international
financial institutes and by continuous and mutual international collaborations,
provides a complete collection of services toward financing via promotion of
foreign investors; some of which are as follows:
1)
Provide consultation concerning supply of
foreign financial resources and determine the proper time, procedure and amount
for supplying
2)
Provide consultation concerning opportunities
and fields of financing in production, trading, service provision, construction
and real estate domains
3)
Provide consultation concerning valuation and
appropriate prices in transactions with foreign investors
4)
Provide consultation concerning partnership and
selection of reputable and trustworthy foreign investors
5)
Provide consultation and marketing services for
transference of ownership, merger, acquisition and separation, upon dealing
with reputable foreign investors
6)
To offer help in identification and encouraging
reputable foreign investors
7)
To do marketing and sell securities to reputable
foreign investors
-
Identification of foreign institutional
investors (entry of foreign investors to the Iranian market) and selection of appropriate investors with respect to the
environmental conditions
-
Offering shares in foreign stock markets
-
Marketing and identification of foreign
investors for main and block transactions
-
Offering transnational certificates of deposit
in abroad (general or private offering)
8)
Provide consultation and engage in designing and
presenting feasibility studies, acceptable to the international banks