WIN-WIN theory – where each side looks at how to make a deal feasible and suitable for both sides – always works. The investment by the companies in a foreign land is no exception, whether it is in the manufacturing, trade, agriculture or oil and gas sectors.
In the particular case of foreign investment, making a sector or country investor-friendly should be the aim of both sides.
Here is a list of key factors conducive to the win-win theory of foreign investment.
Companies intending to invest in a foreign country need first and foremost to have confidence that the economy in which they make an investment will be managed by a competent and predictable way.
Simply stated, investors must believe that the rules of the game will not change in the middle of the game. To put it more simply, stable, predictable macro-economic policy is one necessity.
Secondly, an investor must be able to rely upon the integrity of the host government and its ability to maintain law and order.
The purchasing power of the host country’s customers is one of the key factors to attract foreign investors.
The freer the market, the more attractive the host country becomes as an investment site for foreign investors.
The cost of government regulation and intervention in the affairs – and profits – of private companies must be kept to a minimum.
The likelihood that a company’s intangible property (patents, copy rights) will be stolen must be avoided.
Investments cannot yield a sufficient or reliable financial return without reliable transportation, power generation, insurance and accounting services.
The quality of the indigenous work force and the availability of local raw materials are also a key ingredients for success.
If you make an investment in dollars and then the local assets (valued in local currency) are devalued, you have lost partly or all of your dollar-based investment. So, a strong local currency is also a recipe for success.
If you cannot take your money out of the country, why invest? So, the ability to remit profits, dividends and interests is required.
A favourable tax climate is also a necessity. Although tax incentives geared to attract initial investments are important, a company’s final investment decision is usually based on how a country’s taxation will affect the normal operating environment once the venture is off the ground.
A company must be able to source goods and services from its operating unit in one market in order to serve other markets or to maximize its global efficiency by trading among its operating entities in different countries to round out its product lines.
