Question

focusing on investing abroad (directly) and foreign exchange rates. Countries actively promote to foreign investors about the opportunities in their country. As you know by now, the United States is the top destination for the FDIs in the world.

What might be the key reasons for USA’s (continuing) success in attracting foreign investment and what other countries could learn from this?

Answer 1

Foreign Direct Investment (FDI) is the investment in businesses made by an investor from another country and the foreign investor has the controlling interest and ownership over the company purchased. These investments are made typically by Multinational Companies either by creating a new company or through acquisition. FDI has several major advantages for the home country which makes it very desirable. It creates local economic benefits and opportunities in the home market, it improves human resources through the development of new skill set and expertise, It gives the economy a boost by increasing productivity, etc. SO, countries actively promote foreign investors the opportunities that are available in their country.                                      

USA experiences the largest amount of FDI inflow from around the world. It has been successful in attracting and maintaining the inflow of funds by attracting foreign investments. Some of the reasons for this are as follows.

• Land of opportunities   

The US has created an ocean of opportunities for foreign firms to invest in through their economic policies. All the sectors of the economy provide foreign investors with significant incentives to invest by providing them opportunities.

• Business environment

The business environment and the investment climate, along with open markets and good entrepreneurial culture makes it a very attractive destination.

• Market

The US also provides a huge consumer market to market goods for production. There is a transparent regulatory business environment that does not hinder the productivity of labors. The labor market is flexible with a diverse and productive workforce.

• Human resources

• A huge supply of skilled and productive workforce also plays a crucial role in attracting FDI. Moreover, the presence of world-renowned colleges and research institutions and the US having a dominant position in R&D also amplifies the incentive.
• Infrastructure

The USA possesses the required infrastructure to facilitate the smooth functioning of business operations. This minimizes the risk associated with production. It has a very good quality of national statistics.

• Historical performance

Given the historical performance of the USA, the country offers strengths well suited for an MNC.

Other countries can learn from the experience of the USA the advantages of building quality infrastructure and a business-friendly environment to incentivize a huge influx of FDI. SO, the other countries can undertake policies to make the market more business-friendly, regulate unnecessary trade barriers and by providing relevant opportunities to the candidates. It is also important to have a diverse and productive labor force with enough flexibility in it. The countries can also increase FDI inflow by investing heavily in R&D and setting up new institutions.