The Role and Nature of Export Credit Agencies in Foreign Direct Investment: Home and Host States' Coordination and the Problem of Political and Commercial Risks Distinguished

Since political instability and the fear of expropriation in some developing states pose grave risks to foreign investors, along with the behavior of the financial markets of these states, the need to insure against such risks is something to be considered in order to encourage investments in these regions. ECAs have also been established to assist foreign investors conducting their business in a given market through granting them loans, guarantees and insurance against certain risks encountered by investors. These loans to foreign investors are granted in order to ease their entry into the foreign market so that the recipient market benefits from the expertise and technology that the foreign investor possess. The study will start with introducing a comprehensive definition for investment in light of the suggested view to what foreign investment stands for. It will highlight the difference between direct and indirect investments as well. Then it will move on to discuss entry of investors to foreign markets and it will discuss the open-door and closed-door approaches in order to identify the various risks associated with such investments. The thesis will emphasize on the need to have a more detailed approach towards investment-risks based on the five-risk distinction rather the classic three-risk approach. This will be of importance especially since the borderline between these risks interlink at times.