Would you be surprised if I told you that the US is the country that attracted the most foreign investment among all countries in the past two decades?
The chairman of Foxconn, Terry Guo, announced on 7/27 that they will be establishing 10.5 generation panel factories in the State of Wisconsin. The investment is estimated to be a billion US dollars and is projected to create three thousand work opportunities! Perhaps people would wonder whether the US is worth the investment of Foxconn and other businesses, considering the high cost in both labor and other relevant expenses.
According to a report(https://goo.gl/j6JvVN) released by the United Nations Conference on Trade and Development (UNCTAD) in June of 2017, the US accumulated as much as 39.1 billion US dollars in foreign investments in the year of 2016 alone. This is followed by 25.4 billion in the UK and 13.4 billion in PRC, which is only one third of what the US has attracted!
Most people believe that foreign investments are made by well-developed and capital intensive Western corporations in developing countries in Asia, Africa or Latin America, in order to gain access to their cheap labor or natural resources. Which is why most would assume that PRC or India would be in the lead of attracting foreign investments. But the aforementioned numbers obviously disprove this theory.
What is the attraction in investing in developed countries like the US and the UK when costs are so high?
When making Foreign Direct Investments (FDIs), a company or an individual needs to take into account a lot more than just the costs in order to determine a suitable destination. They must also consider the difficulty of hiring and firing personnel in the destination country, as well as whether intellectual property and other property rights are sufficiently protected. For instance, does the local government abuse their power of public collection? When such a situation shall occur, would the government offer reasonable compensation? Is the legal structure complete and whether foreigners receive free trial. Can the investments and profits be easily transferred in and out of the country? What is the tax system like? The size of the market. When we factor in all of the above, we will no longer be surprised as to why the US was ranked number one in the accumulation of foreign investments.
According to media reports, Foxconn's actions are based on the assumption that the Trump government will be having looser investment laws, heavily investing in fundamental constructions and having a tax reform as promised. Also, Trump strongly emphasizes the importance of "made in the US". Obviously the US is an expensive country to expand to, but after evaluating all factors in making an FDI, Foxconn has listed the US as the best possible option for an investment like many other corporations have. Perhaps great minds really do think alike!
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