UHY Dawgen Chartered Accountants Blog | Your Business Our focus!: "Winning Foreign Direct Investment gives a shot in the arm to national economies. Not only does it create new jobs and tax revenues in the short term, in the longer term it improves productivity by helping to fund capital investment and making domestic companies more competitive."
This additional boost is never more valuable than at time when global recession has stymied growth, and domestic investment in many countries has slowed dramatically. Most (though not all) countries are keen to encourage as much FDI as possible.
We have just conducted a comprehensive study into comparative national FDI inflows over the five years since the credit crunch, to see which nations have been performing best on this measure.
Our research looked at net FDI inflows during this period in 33 major economies around the world, measuring how successful they have been in attracting FDI compared to their GDP. On average, countries have attracted FDI worth 17% of their GDP over this time.
At the top of the table Belgium, Singapore and Ireland’s favourable tax systems helped them to significantly outperform the rest of the world in attracting Foreign Direct Investment.
Belgium attracted FDI equivalent to 91% of its GDP (a total of US$442 billion) – coming behind only the world’s leading economies in absolute terms (the USA received over US$1 trillion and China US$563 billion).
This was thanks to its particularly innovative use of tax legislation to attract international companies such as facilitating inter-company loans to help them manage global tax liabilities and generous tax breaks for R&D and investment in capital goods.
Singapore attracted the equivalent of 74% of its GDP ($203 billion in total) and Ireland 44% (a total of $93 billion). Both Ireland and Singapore have been enormously successful in setting up favourable tax and regulatory environments that have encouraged companies such as Yahoo, Google, Apple, PayPal and LinkedIn to set up regional headquarters there.
It must be said however, that some governments occasionally discourage the takeover of domestic companies by foreign investors in order to safeguard strategic assets or ensure that companies remain within national control. Egypt, Mexico and Spain are amongst those which have caps or outright bans on foreign ownership of companies or assets.
Overall, the long term trend has been for more economies to open up to all kinds of FDI. Governments in many developed economies recognise that the benefits outweigh the downside, which is why they place a great emphasis on ensuring that they remain attractive to overseas investors. Get your Copy of the Study
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