Do You Think the Government Incentives Is a Main Factor Cause for the Increase in Foreign-Market Entry? Why?

Topics: Finance, Investment, Economics Pages: 1 (299 words) Published: May 22, 2013
Do you think the government incentives is a main factor cause for the increase in foreign-market entry? Why?

I think the government incentives is a main factor cause, because governments are increasingly under pressure to provide jobs for their citizens. Foreign direct investment can serve as a method to attract more industry and create more jobs. Because many foreign investors import equipment, parts and even personnel, the expected benefits in terms of job creation mat often be either less than initially envisioned or only temporary. Government incentives can be classified into fiscal incentives(tax credits or rebates, depreciation allowances), financial incentives (such as grants, preferential loans and loans guarantees) and non-financial incentives(tariffs, import quotas and local content requirements) (Ginevicius and Simeiyte 2011) Generally, fiscal measures are designed to encourage investment in various business sectors, fiscal measures may have both: positive and negative impacts on a country. First of all, the primary aim of these incentives is to create a friendly business environment where foreign investors feel comfortable with the legal and financial framework of the country and have the potential to reap profit from economically viable businesses. (Ginevicius and Simeiyte 2011) Secondly, FDI can be beneficial to a host country. For example, it includes knowledge and technology transfer to domestic firms, labor force, productivity spillovers, enhanced competition and improved access for exports, notably to the source country, as well as provides a significant non debt–creating source of foreign financing. (Ginevicius and Simeiyte 2011) Incentives increase the flow of incoming FDI and maximize their return on a host country and foreign investors.

Reference list
Ginevicius, R and Simeiyte, A 2011, 'Government incentives directed towards foreign direct investment: a case of central and eastern Europe', Journal of Business Economics and...
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