There are four primary avenues that businesses might pursue in order to engage in direct

investment across international borders:

1. Acquisitions and mergers (also known as M&As):

For businesses that are interested in engaging in foreign direct investment (FDI), mergers
and acquisitions (M&As) are a valuable weapon that they may use. Corporate consolidation
is a process that involves the consolidation of firms or their primary assets via the use of
financial transactions. This process enables international companies to rapidly establish a
presence in new markets. A breakdown is as follows:

What are mergers and acquisitions?

In a merger, two firms come together to establish a new company, and they share ownership
and management of the new entity.
A corporation acquires another business by purchasing a controlling stake or entire ownership
of the latter, and then incorporating the acquired business into its current operations.
Why employ M&As for FDI?

Rapid market entry: mergers and acquisitions offer instant access to a well-established
market, as well as brand awareness, customer base, and distribution methods and networks.
When compared to greenfield initiatives, this offers significant time and resource savings.
The acquisition of assets: Through mergers and acquisitions, businesses have the opportunity
to acquire important assets such as technology, intellectual property, or talented staff.
Increasing efficiency, achieving economies of scale, and lowering expenses are all possible
outcomes that might result from combining or purchasing firms that are complimentary to
one another.
Elimination of competition: The acquisition of a rival might result in the elimination of
market share and boost the position of the foreign firm.
Different types of mergers and acquisitions for foreign direct investment:

When a foreign firm purchases a domestic company in the host nation, this would be an
example of a cross-border acquisition.
The difference between hostile takeovers and friendly takeovers is that in friendly
transactions, both firms are in agreement with the arrangement, but in hostile takeovers, the
target company is acquired illegally and against their will.
Acquisition of assets refers to the process of purchasing particular assets of a firm, such as its
manufacturing facilities or branding, rather acquiring the entire corporation involved.
M&As provide difficulties for foreign direct investment:

Integration complexity: It can be difficult to successfully merge two organizations that have
diverse cultures, systems, and workforces.
There are high expenses associated with mergers and acquisitions, which can include
considerable initial financial commitments such as acquisition premiums, due investigation,
and integration costs.
Obstacles posed by regulations: Antitrust restrictions and permissions from the government
can make the process more complicated and cause it to take longer.
The integration of management teams and employees from different cultures can be difficult
and lead to disputes due to the cultural disparities that exist during this process.
Examples of M&As in FDI:

The acquisition of LinkedIn by Microsoft: Microsoft, a company based in the United States,
has bought LinkedIn, a social media platform for professionals based in the United States, in
order to broaden its presence in the field of business networking.
Tata Steel, an Indian corporation, achieved its goal of becoming a global leader in the steel
industry by acquiring Corus Group, a European steel firm. This purchase was made possible
by Tata Steel's acquisition of Corus Group.
The investment made by SoftBank in Alibaba: SoftBank, a Japanese investment company,
made an investment in Alibaba, a Chinese e-commerce behemoth, in order to get exposure to
the rapidly expanding Chinese market.
A strong tool for foreign direct investment (FDI), mergers and acquisitions (M&As) enable
speedy market entrance, asset acquisition, and the possibility of synergy. However, in order to
ensure a successful implementation, it is essential to give serious thought to the difficulties,
the complexity of integration, and the cultural differences concerned.
2. Joint ventures:
Joint ventures, often known as JVs, are a kind of foreign direct investment (FDI) that include
the formation of a new economic entity in a host nation via the collaboration of two or more
enterprises, generally originating from separate countries. Through this relationship,
businesses are able to capitalize on each other's strengths and overcome obstacles that present
themselves while entering new markets.
Why employ JVs for FDI?

The financial load and hazards that are connected with entering a new market are distributed
among joint venture partners, who share resources and risks. It is possible to pool resources
like as technology, knowledge, and brand awareness, which will reduce the amount of
individual investment that is required.
Knowledge of the local market: Forming a partnership with a local firm offers significant
insights into the rules, culture, and tastes of consumers in the host nation, which makes
market entrance and navigation much simpler.
For the purpose of ensuring compliance with rules, certain host nations may demand that
foreign businesses form partnerships with local organizations for specific projects or sectors.
In order to overcome cultural barriers, joint ventures (JVs) can be of assistance in bridging
the cultural differences that exist between the foreign firm and the host nation, hence
supporting improved communication and partnerships.
Through the utilization of complementary talents and knowledge, it is possible to develop a
venture that is more competitive and profitable in the new market by combining the
capabilities of many organizations.
Various Forms of Joint Ventures:

Joint ventures based on equity include both partners contributing capital, and they share
ownership and management of the new organization in proportion to the amount of money
they have invested.
Partners work together on certain projects or activities through the use of contractual joint
ventures, which do not involve the formation of a distinct corporation. At the same time, each
partner maintains ownership of its assets, and earnings are distributed according to the
parameters that were agreed upon.
Joint ventures that are held by a majority of the partners involve one partner holding a
controlling share in the new firm, while the other partner holds a minority stake. The majority
partner is able to exercise a larger degree of control as a result of this, while the minority
partner continues to reap the benefits of the minority partner's local knowledge and skills.
FDI obstacles posed by joint ventures:
The partners may have different goals and points of view, which can make it difficult to reach
a consensus on important choices. Shared decision-making could be a solution to this
problem.
Conflicts of culture: The integration of diverse management styles and work cultures can
result in misunderstandings and disagreements amongst stakeholders.
Strategies for exiting: For the purpose of avoiding future arguments, it is vital to define
explicit exit plans for the situation in which the relationship needs to be dissolved.
When one loses control: The local partner may be required to share control and
decision-making authority with the foreign company in a joint venture, which may result in
the foreign company's influence being reduced.
FDI joint ventures include the following examples:

Mahindra and Ford in India: Ford Motor Company, a multinational car manufacturer based in
the United States, and Mahindra & Mahindra, an Indian multinational automobile
manufacturer, have formed a partnership to establish a joint venture for the purpose of
manufacturing and selling automobiles in the Indian market.
Nestlé and Mengniu in China: Nestlé, a Swiss food and beverage corporation, has created a
joint venture with Mengniu Dairy, a Chinese dairy powerhouse, in order to manufacture and
market yogurt and ice cream products in China.
Siemens and Areva in the nuclear power industry: Siemens, a German multinational
corporation, and Areva, a French nuclear power firm, have formed a joint venture in order to
build and market nuclear power facilities all over the world.
In general, joint ventures have the potential to be an effective instrument for foreign direct
investment (FDI) since they offer access to local expertise, the opportunity to share risks, and
the possibility of synergy. However, in order to have effective and long-lasting partnerships,
it is essential to give serious attention to the difficulties and potential conflicts that may arise.

3. Investments in Greenfield Projects:

Greenfield investments are a form of foreign direct investment (FDI) that are considered to be
both daring and ambitious. In this type of investment, a business builds a wholly-owned
subsidiary in a host nation from the ground up. Rather of acquiring existing assets or forming
partnerships with local businesses, this strategy entails constructing brand-new facilities,
infrastructure, and operations from the bottom up.

Why should foreign direct investment be made through Greenfield Investments?

Greenfield investments provide the highest amount of control over operations,
decision-making, and brand positioning in the host nation. This is because greenfield
investments include the highest level of control. By doing so, the company is able to adjust
everything to the unique requirements and plans of the business.
Greenfield initiatives provide a fresh start since they do not include any legacy concerns or
cultural conflicts, which are potential situations that may occur as a result of acquisitions or
joint ventures. Consequently, this makes it possible to construct a new culture and method of
working from the bottom up.
In developing economies, where the presence of established enterprises may be restricted,
greenfield investments might offer a first-mover advantage in terms of gaining access to new
client bases and market sectors.
Sharing of knowledge and the transfer of technology Greenfield projects have the potential to
serve as a vehicle for the transfer of technology, expertise, and best practices from the
investment enterprise to the host nation, therefore contributing to the development of the
local community and the creation of new skills.
Complications Associated with Greenfield Investments:

High initial costs: The construction of new facilities, infrastructure, and operations
necessitates a substantial initial investment, which may be both hazardous and
time-consuming to recover from.
Greenfield projects can take years to design, execute, and become profitable, which requires
the investing firm to have a long-term commitment and patience. Greenfield projects are
time-intensive.
Greenfield projects may face considerable problems and delays due to political and
regulatory risks. These risks include political instability, bureaucratic impediments, and
unexpected legislation in the country that is hosting the project.
Operating in a new location can provide obstacles in terms of adjusting to local customs,
language, and business practices, as well as properly managing logistics and supply chains.
These issues might be a result of cultural and logistical constraints.
The following are some examples of greenfield investments in foreign direct investment:

Manufacturing factory of Toyota in Kentucky, United States of America: Toyota, a Japanese

automobile manufacturer, developed a greenfield manufacturing plant in Kentucky in order to
build automobiles for the North American market.
Facilities in China where Foxconn manufactures iPhones Foxconn, a Taiwanese electronics
company, constructed a number of greenfield plants in China in order to manufacture iPhones
and other Apple products.
Ethiopian water treatment plant owned and operated by Nestlé: Nestlé, a Swiss food and
beverage business, made an investment in a greenfield water purification facility in Ethiopia
with the goal of providing people with safe drinking water and creating employment
opportunities in the surrounding area.
For foreign direct investment (FDI), greenfield projects are a strategy that is high-risk but
high-reward. They provide maximum control, access to the market, and the possibility of
exerting a beneficial effect on the nation that is hosting them. However, in order to achieve
success, it is essential to give careful attention to the substantial hurdles and the long-term
commitment that is necessary.

4. Brownfield Investments
Compared to greenfield developments, brownfield initiatives take a more deliberate and
sophisticated approach to foreign direct investment (FDI). To begin operations, corporations
take use of the infrastructure and facilities already in place in the host nation rather than
starting from scratch. Usually, this entails purchasing or renting pre-existing facilities and
customizing them to meet their requirements.

Why should FDI target brownfield investments?

Faster market entry: Compared to greenfield initiatives, brownfield investments provide a

speedier route into a new market. The organization may begin making money sooner by
operationalizing its current infrastructure and facilities immediately.
Lower beginning costs: Compared to starting from scratch, buying or leasing existing
facilities is usually less expensive, lowering the needed initial financial risk and expenditure.
Lower operational risks: Brownfield projects have the advantage of already-existing supply
chains, infrastructure, and maybe a trained crew, which reduces difficulties and interruptions
in operations.
Leveraging current assets: Brownfield investments enable businesses to make the most of
their current production lines, machinery, and brand awareness in order to maximize resource
usage and maybe get access to pre-existing clientele.
Possibility for environmental benefits: By making use of already-existing infrastructure and
lowering the demand for new construction, brownfield projects can support sustainable
development and perhaps reduce their negative environmental effects.
Brownfield Investment Challenges:
Modification and adaptation: It's possible that the company's unique demands aren't fully met
by the facilities that are currently in place, necessitating expenditures for refurbishment,
adaptation, and maybe taking care of environmental concerns.
Legacy difficulties: Businesses purchasing old facilities may inherit unresolved issues such as
labor disputes, environmental liabilities, or antiquated technology, necessitating meticulous
due diligence and maybe additional expenses.
Restricted flexibility: Compared to greenfield investments, brownfield projects provide
businesses less freedom since they may need to make adjustments for the rules, layouts, and
possible constraints of the purchased facilities.
Complexities in integration: It might be difficult to integrate current personnel and cultures
with the parent company's activities; this calls for sensitive cultural understanding and good
communication.
FDI Brownfield Investment Examples:

The purpose of Coca-Cola's acquisition of juice manufacturer Chiquita Brands was to

broaden its beverage offering and take use of Chiquita's current Latin American production
and distribution networks.
Ford's modernization of its Chennai, India, manufacturing facility: Ford modernized its
Chennai facility to manufacture the Figo hatchback model, making use of the labor and
infrastructure already in place and modifying the production lines to fit the new model.
Acquisition of AirAsia India by Air India: In order to increase its domestic market presence
and take advantage of AirAsia's well-established network and well-known brand in the Indian
aviation industry, Air India purchased a majority share in AirAsia India.
In general, brownfield projects provide a balanced approach to foreign direct investment
(FDI) by offering quicker market entrance, lower costs, and better resource utilization, but
they also come with adaptation hurdles, legacy concerns, and restricted flexibility. A
thorough assessment of the current resources, possible hazards, and requirements for
adaptation is essential for brownfield investment projects to be successful.
These are the strategic goals and objectives of the organization.
How much control one would like to have
The resources that are readily available
The political climate and economic climate of the country that is hosting the event
The regulatory structure for foreign direct investment

Every form of foreign direct investment (FDI) comes with its own set of benefits and
drawbacks, and the most appropriate option will change depending on the particular
conditions.
The decision between brownfield and greenfield investments is influenced by a number of
variables, and each has benefits and drawbacks of its own. This is a comparison to aid with
your decision:

Greenfield Capital:

Benefits

Maximum control: Everything is designed by you from the ground up, according to your
unique requirements and brand.
New beginning: There are no cultural conflicts, legacy problems, or antiquated infrastructure
to handle.
Market access: In developing areas, this may provide a first-mover advantage.
Transferring technology and exchanging knowledge can help foster the development of skills
locally.
Drawbacks:

High initial costs: It takes a lot of money and time to build new facilities.
Time-consuming: might take several years to organize, carry out, and turn a profit.
Risks related to politics and regulations: susceptible to changes in the host nation's laws and
instability.
Logistical and cultural barriers: It might be difficult to adjust to new language, habits, and
business procedures.
Investments in Brownfields:

Benefits

speedier market entry: Make use of the infrastructure and facilities already in place for a
speedier launch.
Cheaper up-front: Purchasing or renting already-existing facilities is less expensive than
developing new ones.
Decreased operational risks: The staff, supply chains, and infrastructure that are already in
place reduce operational difficulties.
Leveraging current assets: For a quicker return on investment, make use of manufacturing
lines, machinery, and brand awareness.
Possibility of environmental advantages: Reusing current infrastructure lessens the demand
for brand-new building.
Drawbacks:

Modification and adaptation: It's possible that the facilities currently in place don't quite meet
your demands, necessitating further funding.
Legacy Problems: Costly hidden issues might include labor disputes, obsolete technology,
and environmental responsibilities.
Restricted adaptability: Your activities may be limited by the need to adjust to current layouts
and rules.
Complexities of integration: It might be difficult to integrate current staff and cultures.
Multinational corporations (MNCs) expand their areas of operations beyond national borders
in order to take advantage of current flaws in national markets for products, factors of
production, and capital markets. This is done in light of the fact that they have superior
competitive advantages over local firms in terms of economies of scale, labor
competitiveness, product differentiation, managerial competencies, and financial strength. By
acting in this manner, they raise their profitability and boost the value of their stockholders.
In terms of economies of scale, production differentiation, managerial and technological
acumen, speed of services, flexibility, and financial capabilities, they have greater
competitive advantages than local enterprises. This is the reason why they are able to do this.

The strategic consideration of increasing corporate control overseas and obtaining an edge
over their competitors in the search for markets, suppliers of raw materials, or technical
know-how originally motivates multinational corporations (MNCs) to expand their
operations overseas. The accomplishment of good financial outcomes, on the other hand,
must be the primary objective at some time throughout the life cycle of the investment.
According to Ahorani, the decision to make a foreign investment is typically a reaction to a
specific opportunity that comes from stimulating factors either within or outside the business.
This is in contrast to the traditional practice of searching for attractive investment chances
overseas. The source of the external stimulation might be the nation that is hosting the
multinational corporation, the clients of the MNC, or the distributors of its products.
Regardless of whether the stimulus originates from within the firm or from outside the
organization, strategic considerations such as the loss of a market, the "bandwagon effect," or
intense competition from outside the domestic market would compel the company to give
serious consideration to the possibility. In addition to this, there are additional strategic
considerations that serve as catalysts for investment from overseas.
The following is a discussion of some of the major drivers of foreign investment:

● Imperfections in the product and market: In addition to their overall capacity

to interpret shifting consumer demands, convert them into marketable goods, and
capitalize on market imperfections, multinational corporations (MNCs) that
possess particular intangible capital, such as patents, trade names, and general
marketing expertise, may be encouraged to invest overseas. This may be
accomplished through the development and adaptation of new products, quality
assurance, distribution, advertising, and after-sale support. When it comes to
entering foreign markets, multinational corporations (MNCs) often choose foreign
direct investment (FDI) over alternative methods in order to avoid local
businesses from misusing their intangible assets. Coca-Cola made the decision to
go with foreign direct investment (FDI) rather than allowing local enterprises a
license in order to access global markets. This decision was made mostly for the
purpose of protecting the formula for their well-known soft drink. If the business
allows a local firm to become the manufacturer of Coca-Cola, it cannot ensure that
the formula's trade secrets will be preserved in their entirety. It is essential to keep
in mind that the mere existence of market failure does not justify foreign direct
investment (FDI), despite the fact that local businesses have an inherent cost
advantage over foreign investors and multinational corporations (MNCs) can only
succeed abroad if the production or marketing edge they possess cannot be
acquired or started by local businesses. When it comes to the markets for factors
 and goods, they are required to develop and maintain barriers that are long-lasting
and prevent direct competition.
● Market Possibilities: The presence of large market prospects overseas and a
fiercely competitive local market that restricts the rise in demand and the
subsequent decline in market share may motivate multinational corporations to
join high-potential foreign markets. This may be the case because of the existence
of both of these factors. As an illustration, the existence of attractive markets has
lately made it possible for a number of developing countries, such as Argentina,
China, Mexico, Chile, and Hungary, to attract foreign direct investment
investment.
● Trade Barriers: It is possible for a corporation to opt to build production
facilities in these countries in order to circumvent the restrictions that are imposed
by the government on imports and exports. These restrictions include taxes and
quotas, which make it difficult for commodities to move freely across national
boundaries. As an example, Honda created a facility in Ohio to produce vehicles
in order to circumvent the tariff regulations imposed by the United States
government against the company. One explanation for the recent surge in foreign
direct investment (FDI) in Mexico and Spain is that multinational corporations
(MNCs) are eager to circumvent the external constraints imposed by the European
Union and the North American Free Trade Agreement (NAFTA).

● The Presence of Higher Profits in International Markets: There is a possibility

that multinational companies (MNCs) may divert their investments to certain
foreign markets because of the possibility of higher earnings in certain global
marketplaces. On the other hand, multinational corporations may face intense
rivalry from local businesses, which might be able to deter new competitors by
lowering their prices.

● Labor Market: The labor market is the most problematic component of the
manufacturing process, and the cost of labor varies greatly from country to
country around the world. Wage expenses are somewhat cheaper in Mexico,
Malaysia, and India than in other countries. Corporations such as Black & Decker
Corporation, Eastman Kodak Company, Ford Motor Company, General Electric
Company, Smith Corona, Zenith Corporation, and Honeywell are among the
multinational corporations that have made investments in these countries as a
result of the drastically decreased labor costs.

● Access to Inputs: Particularly if they want to sell the finished product to people
of that nation, multinational corporations (MNCs) often avoid importing raw
materials from countries where they are not easily available at a consistent price.
This is especially true in situations when the transportation costs are high. Taking
into consideration the circumstances, it would be prudent to construct
manufacturing facilities within the country in areas where the essential raw
 materials are easily available. As a result of these factors, the majority of
multinational corporations that are involved in the extraction or natural resources
industry often directly hold oil fields, forests, and mining deposits.

● Access to Foreign Technology: The establishment of manufacturing facilities or

the purchase of facilities that already exist in those countries is becoming
increasingly common among multinational corporations (MNCs). This is done
with the intention of gaining knowledge of cutting-edge technology and utilizing
it to improve their own production processes at their global subsidiary facilities.

● Making Profits from Monopoly Status: According to the Industrial

Organizations Theory, many businesses that have access to unique resources and
skills that their competitors do not have a tendency to expand internationally in
order to capitalize on these advantages. This is especially true if the businesses
discover that they have already successfully capitalized on these advantages in
local markets.

● Cycle of Product Life: In accordance with the product life cycle theory
developed by Raymond Vernon, businesses ought to make investments in foreign
direct investment (FDI) at a certain stage in the life cycle of a new product before
releasing it to the market. According to Vernon, when American corporations
originally released new products, they restricted their manufacturing facilities to
the domestic market when they were first presented. In the beginning, they were
able to charge a relatively high price for the product because they had invented it.
This was possible because buyers were not as price conscious at the time. This
presents them with the opportunity to improve the product while simultaneously
taking into account the ever-changing requirements of the customer. The output
will begin to exceed the needs of the local market after the product has been
optimized and standardized in order to take advantage of economies of
manufacture and distribution. As a result of the growing demand for the new
product in such countries, the pioneering businesses have made the decision to
export the excess goods to those countries. Given the consistent increase in
product demand in these regions, it is possible that businesses based in the United
States may be lured to create manufacturing facilities in other countries in order to
have the ability to service local customers. As the product reaches its maturity and
the market is eventually saturated with items that are identical to one another,
ultimately leading to a decrease in profit margins, it becomes vital for firms to cut
their expenses in order to remain competitive. Consequently, this may cause
businesses to search for locations in other countries where the prices of their
products are lower owing to defects in the product market.
●
● Therefore, foreign direct investment (FDI) becomes lucrative for RY multinational
corporations once a product reaches maturity and cost becomes the key factor. It should
be noted, however, that the Vernon Theory, which was developed in the previous
century, at a time when the United States led the world in R&D capabilities and product
innovations, cannot serve as the sole justification for foreign direct investment (FDI) due
to the complexity of the behavior and strategies of multinational corporations (MNCs),
the rise in product innovations in many advanced nations, and the growing complexity of
the global production system. When a new product is launched to the market,
businesses may decide to create manufacturing facilities in several countries. This
decision may be made in response to the changing market.

● Foreign Exchange Rate Behavior: Changes in the currency rate have an effect
on the decisions that multinational corporations make about foreign direct
investment (FDI) because cost is one of the primary determinants. It is possible
that firms may be convinced to invest in a nation whose currency they think to be
undervalued. This is due to the fact that the initial investment outlay requirements
would be relatively low. Foreign direct investment (FDI) is often driven by a
company's need to counterbalance shifting export demand as a result of
fluctuations in exchange rates.
● Financial Market flaws: The worldwide presence of vulnerabilities in financial
markets may provide as an incentive for multinational corporations to participate
in foreign direct investment (FDI). In addition to their ability to reduce taxes and
circumvent currency limitations, multinational corporations (MNCs) may be the
driving force behind foreign direct investment (FDI) because of their desire to
reduce the risks associated with international exchange rate swings, currency
controls, expropriation, and other forms of government intervention through
global diversification. Generally speaking, the benefit of diversification that
comes from operating in several nations with uneven economic cycles and varied
economic and financial environments helps to reduce the volatility of profits that
multinational corporations (MNCs) experience. Additionally, the firm may be able
to benefit from a reduced cost of financing as a result of the perceived lower risk
that multinational corporations (MNCs) have owing to more consistent cash
flows. Foreign direct investment (FDI) is pulled to a nation in order to cover the
gap that exists between the availability of funds for sustainable organizations and
the demand for those funds when the mechanism that allocates financial resources
in that nation is inefficient and leaves a huge gap between the two.
● For example, the primary reason that China received such a large amount of
foreign direct investment (FDI) is that the country's financial system distributed
domestic savings in a very inefficient manner. This means that the majority of the
funds were distributed to state-owned enterprises and other inefficient businesses,
which may have prevented the private sector from receiving the necessary
funding. It is important to note that foreign direct investment (FDI) is a crucial
role since it provides financial help to proprietors of private businesses.
Foreign companies can engage in a nation's economy through two distinct channels: foreign
portfolio investment (FPI) and foreign direct investment (FDI). Despite the fact that they both
include investing funds abroad, their goals, strategies, and results are very different. Below is
a summary of their main differences:

Reason for Motivation:

FDI: Is concentrated on acquiring ownership and control over assets in the receiving nation,
usually through joint ventures, acquisitions, and greenfield investments. This makes it
possible to have a long-term, strategic impact on the regional economy.
FPI: Purposes to make money by investing in easily traded securities such as mutual funds,
equities, and bonds. Investors don't want ownership or influence over the underlying
company; instead, they want income and capital appreciation.
Technique:

FDI: Consists of direct investments in operations, infrastructure, and tangible assets. This
may entail constructing new factories, purchasing already-existing enterprises, or forming
alliances with nearby industries.
FPI: Using financial markets, indirect investments are made. Investors buy assets that are
issued by governments and businesses in the host nation; they do not, however, have direct
management or control over these organizations.
Effect:

FDI: Has the potential to significantly affect the economy of the host nation. It can help build
infrastructure, transfer technologies, and generate jobs. It may also give rise to worries about
resource exploitation and foreign domination, though.
FPI: Has a less significant effect on the economy of the host nation. It can give governments
and companies funds, but it has no direct impact on the development of infrastructure or the
generation of jobs. FPI has the potential to be erratic, resulting in abrupt capital inflows and
outflows.