WHAT ARE THE MOTIVE BEHIND U.S GOVERNMENT AND OTHER GOVERNMENTS’ WORLDWIDE ENCOURAGEMENT FOR FOREGHN DIRECT INVESTMENT?
The term FDI is a business term which is referred when an individual or a business owns ten percent or more of an upcountry’s company’s capital. There are several main factors that motivates U.S government encourage for foreign direct investment as well as other government worldwide. These factors can be highlighted categorically basing on economic and political stability in most countries .As a result many countries have preferred it U.S included. Many governments mainly encourage FDI in their countries in order to create jobs, expand mainly local technical knowledge, as well as to increase their economic standards preferably. Some countries such as Singapore and Hong Kong there before realized that FDI would help them grow exponentially hence upgrading living standards of its citizen as well.
In comparison, for some decades many other countries in Asia controlled FDI in their countries by making it mandatory to be having extensive paperwork and bureaucratic assurance as well as local partners for any business. These regulations created disincentives for many worldwide companies. Economic factors basically industries build a very strong motives towards FDI . US companies during war II were mainly attracted by countries with low production cost that in return provided large amount of profit to those companies which could venture into those opportunities. The first stage companies produce in the home market and also export to foreign market in this stage foreign subsidiary mainly service establishment as sales or both .in the second stage firm now are able to have their own production plant in foreign countries market. Here labor force is mainly from the surrounding. The third stage involves several companies coming together from different countries to form one company to operate in the whole region, an example of this company include automotive industry such as those of¬ chemicals and petroleum to mention a few.
Economic factors such as making cost of production to be minimal as well as expanding market share often are coupled with domestic market and more of saving and dollars. Here trade barters such as domestic content legislation, tariff and restrictive import quotas which share both political and economic factors are also associated with the economic factors since they play an important role in the price competition and sharing market foreign commodities.
A political factor such as political stability of a certain country leads to a healthy environment to willing investors hence high chances for foreigners investing. This actually promotes foreign direct investment considerably. In conclusion foreign direct investment has been a great concern to most of government around the world since it facilitates job creation as well as good interrelation between different countries.