Companies reaches a time when they feel that the local demand is fully saturated therefore opt for foreign investment. This move is being taken by all players in an economy from education institutions such as universities to financial services companies such as banks. Some time back countries were very harsh to foreign companies trying to set up branches. However currently many countries are passing laws and decrees to encourage more and more companies to settle in their country. This after discovering that foreign companies are beneficial to the country by-
Citizens of the country will have wide variety of employment vacancies. Companies when they expand will require personnel with local expertise. Hence the citizens will enjoy getting revenue from the foreign company.
Improvement of the infrastructure. It is usual for companies expanding to other countries to have an agreement with the local government that they will offer assistance in developing the infrastructure. In addition the local government generates revenue by charging fees and taxes to the foreign company.
Provision of high quality goods and services. Such as by allowing a foreign school to settle the county get exposed to new curriculum. Therefore residents are able to acquire skills which there had to travel abroad to learn locally.
Legislation which have been passed to facilitate expansion of businesses into the country includes.
Statutes concerning with land and real properties. Some countries had very strict conditions that a business had to own a piece of land in order to operate in the Country. The problem was that the land owners in the country were afraid of their land being acquired by foreigners. Foreign country’s land is exposed to high dangers and the company stands to lose large part of it investment in case its operations are shut down. This laws was replaced by allowing businesses to have short term occupancy agreement of real estate with the residents.
Reduction of the foreign company business registration requirements. The foreign companies usually had to provide and get a lot of approvals before they would set up the operations in the Country. This would take a lot of time and many business would give up midway. This strategy aim to entice more foreign companies into the country.
However although countries are doing all the above they have added the financial cost required to trade in the country. The fees charged to the foreign countries maybe in terms of capital requirement or taxes have been increased at a very high margin. The governments of the foreign countries will argue that to make the services delivery better they have to charge more.
Foreign government will at one point in time have to give in to the concerns raised by the high fees and taxes imposed on foreign companies.