Business Investment, Business Investment Opportunities

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Business investment refers to the commitment of funds to a business either in an active capacity or as a passive investor. An active investor would provide seed capital or startup capital, pre-IPO funds or franchising finance. However, most people seek business investment opportunities as passive investors, purchasing stocks and bonds. Business investment decisions require a risk-return tradeoff analysis.

Business Investment: Returns

Business investment opportunities are largely contingent on the prospective rate of return or profit of a proposed business venture. The return on investment (ROI) is the ratio of money gained to the amount of funds invested. In case of passive investing (into shares and bonds), the ROI (or rate of return) includes a stream of income (dividends for shares and interest for bonds) as well as capital gains (appreciation in share or bond prices over time). The rate of return from a business investment is more than a function of the expected cash flows and capital appreciation. Since inflation erodes the value of money, it is important to consider the time value of money. The annual percentage return realized on an investment and adjusted for changes in prices on account of inflation or other external effects is known as the real rate of return.

Creation of Business Investment Opportunities

At the international level, the World Bank Group lends around $15-20 billion every year to finance developmental projects in the third world countries. The International Bank for Rural Development (IBRD), International Finance Corporation (IFC) and Multilateral Investment Guarantee Agency (MIGA) offer specific products, such as bonds, loans and guarantees, to potential investors for financing development in the emerging and underdeveloped economies. The IFC aids small and medium enterprises (SMEs) in the developing world by providing capital, equipment, technical assistance and guidance to fund these projects.

The European Bank for Reconstruction and Development (EBRD) and European Investment Bank (EIB) promote the basic and infrastructural sectors in Southeastern Europe in countries like Bosnia and Serbia. The Clean Development Mechanism (CDM) of the Kyoto Protocol, which has been put into operation by the United Nations Conference on Trade and Development (UNCTAD) in the developing countries, also promotes a greener and cleaner world for sustainable development.

Important Business Investment Destinations

Business investment opportunities have been on good ground in India, China, Vietnam, Singapore and the Gulf region. Also, a few African and Latin American countries have been doing well over the past few years. There exist huge business opportunities in Tanzania in Africa in the field of manufacturing, mining and agriculture.

In India, the state of Gujarat offers excellent business investment opportunities. The Indian government can be credited with the surge in investment opportunities in the country. Liberalization of the economy since 1991 has opened up sectors such as food processing, chemicals, automobiles, oil and natural gas and telecommunications. Besides, a slew of incentives are being offered to promote investments in the country, including the relaxation of norms for external borrowing, capital goods imports and customs duty reduction and tax deductions for certain sectors.

Investment opportunities in the infrastructural sector, such as roads, ports and civil aviation, are huge in countries like India, as is in the power, coal and renewable energy sectors. With the government allowing most of the Foreign Direct Investment (FDI) via the automatic route in these sectors, business investment opportunities have emerged enabling foreign investors to garnering good returns. An FDI cap in the telecommunications sector has been raised to 100% in case of Internet service providers according to the latest investment policy followed by the Indian government.

The development of the non-oil sector in the Gulf countries entails attractive inward investments. Countries such as Bahrain have various sectors that are attractive for business investment. These include the finance industry, manufacturing and tourism. The government of Bahrain has been actively involved with the private sector for creating investment avenues for investors from across the world. Most of the GCC countries that attract business investment offer a tax-free environment. Investors are permitted to own 100% of the enterprise and there are no restrictions on the movement of capital.