How does governments attract foreign direct investments?
An organization should consider several factors when planning for foreign direct investments. Some of the factors that affect FDI include the political, the track record, cost-advantages analysis of the entire project, the investment and political climate of the country where the investments will be made. Also, making a good case study on the progress of a similar project will assist in making the right decisions. You have to look for future scenarios that may occur, such as imminent elections and the policy changes that can be implemented in a country before you start investing in the country. Governments work with the Top platform to attract more foreign investors will be a great idea.
Good policies help in attracting direct foreign policies.
The changes in policies removed geographical and political constraints for doing various businesses in these countries, creating a conducive business environment. It resulted in a situation where a successful company in a specific country can work in any country in the world when it wants. The advance in technology also plays a significant role. It acts as a catalyst for the process of globalization.
Globalization is a major factor in FD
Foreign direct investments are the aftereffect of globalization. Nowadays, most of the countries have started to carry out economic liberalization strategies. Thus, the governments of these countries begun to remove prohibitive and stringent legislation that hindered foreign companies from starting a business in their countries. Many countries started free trade areas with neighboring countries
Foreign direct investment (FDI) theoretically offers a win-win situation for both the host country and the foreign organization. In most d developed countries; the cost of manufacturing will be a bit higher than the developing countries because of relatively high wages and the difference in currency value. So, if you are from a developed country and you want to establish a company in developed countries, you can consider lowering the prices of the product by constructing manufacturing units in developing countries. These companies are equipped with production knowledge and technical expertise while developing countries offer low-cost human resources and infrastructure facilities.
Subsidizing companies attract foreign investment
But things are not as rosy and straightforward as it looks. Various countries have their rules differ from other countries concerning foreign direct investments. The big part of foreign investments comes as subsidiary firms or companies. Most of the companies prefer forming a joint venture with the right company in the foreign country. Although some countries can put a limit on the number of shares, the foreign investor can have on the subsidiary firm
The main areas of foreign direct investments are infrastructure development, such as the construction of airports, roads, dams and bridges, software development, and oil exploration. Nowadays, the mass media business telecommunication sector is witnessing an improvement in foreign direct investment flow. With globalization ready for expanding its branches through advances in technology, there are more and more sectors of business are likely to be focused by interest from foreign direct investments
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