Foreign Direct Investments FDI

Foreign Direct Investments

Role of State Programs in Promoting FDI

The German pharmaceutical company Boehringer Ingelheim is one of the largest enterprise located in Connecticut State. It is one of the largest tax-paying companies in the region and has employed very many people. Connecticut, the state where the company is located at, gives a very conducive environment for the foreign direct investments to thrive well (Zarsky, 2013). This is because the state is located in a region with a lot of ways to attract foreign investors.

One of the essential factors that have made this state the best for investments is its geographical location. It is located at the coastal line of the Atlantic Ocean. This way, it attracts many tourists and therefore creating a large market for the goods produces along this area. Many of its towns and cities are suburbs of New York City. Most of the southern and western regions of Connecticut are in the bracket of New York’s metropolitan areas where three out of eight counties are included in the tri-state area (Balestra & Negassi, 2012). These are some of the geographical factors that have led to the high number of investors’ choosing to be in this state.

According to Gotz, & Jankowska, (2016) the state also has set some legal regulations which make the life and thriving of companies in this country easier. Some of these regulations are the ones pertaining the recycling of some items. It makes sure that all the materials that could be harmful to the residents of this region are recycled

The area has also put efforts in making the educational background of the people of this region to be a little higher, and this is because there are many universities and colleges. All these are aimed at increasing the population in this state. It is ranked as the fourth most densely populated state in the United States (Svetlii, 2014). The higher the number of residents in an area, the more the market for products produced in that same area.

Infrastructure in Connecticut is another crucial aspect that has led to the improved investments in the region, from industrialization, transport by road, rail, water, and air are all present in the state which reduces the cost of transportation (Svetlii, 2014.). Real estates have also developed to a greater extent and also industrialization where Ingelheim, a pharmaceutical manufacturer, is a part.

Impacts of FDI

FDIs have become very common to the state of Connecticut. This way, there have been positive and negative impacts on the local government, employment, linking with the local universities, exportation, and immigration (Shaver, 2014). In the pharmaceutical industry, the German company that has not been left behind on impacting the people of this state.

On the employment side, the company has employed a large percentage of people in the state. It is said that the company has brought over three thousand jobs to the people of Ridgefield region. Furthermore, it was noted that it was establishing a new research facility which will create extra one hundred and fifty job opportunities which will be given to the residents (Shaver, 2014). Therefore, the company has impacted on a more considerable length to the lives of the people of the region by improving their standards of living.

The fact that it is the largest tax paying company in the city increases the overall amount of income that the government gets from the companies. If there were no investing in the state if you are from another country, the amount of revenue collected from these companies would otherwise have not been raised.

The two research facilities that the company is planning on opening will improve the linking of the company with the learning institutions in this region. This way, the number of people that will improve their educational levels will be elevated, and more people will gain extra knowledge. The level of importing pharmaceutical products will also be reduced due to the manufacture of this company (Maric & Shukarov, 2017). The cost of the imported goods and services will also be lower than the way it would have been if the company was not there. The export of goods from this state will also increase leading to a high amount of income.

Goals of FDI

One of the main goals of FDI is sustainable economic growth. In Connecticut, the foreign direct investments can be said to have been successful in meeting this goal. We find that for instance in the German pharmaceutical industry in Connecticut has tried to meet this goal. This is shown in that the foreign firms in Connecticut provide employment opportunities one hundred thousand people from this region (Zarsky, 2013). This is estimated to be seven percent of the total jobs in the private sector.

When the state is compared to other states, it is ranked third for the number of residents of that state that have been employed by foreign companies. This way, we can deduce that the economic growth and the sustaining of this growth have been achieved to a large percentage (Rholetter, 2015).  This sustainability can also be seen in the amount of tax that the companies pay to the government of Connecticut brings a lot of improvements to the local people.

Local and regional development of this region has been promoted to a large extent. This is seen in that the number of people currently living in the area has risen to very high levels and most people are now willing to invest in the region. There are also the price regulations of imports where they have to charge lower than the companies based in this part. A large number of people purchase the locally produced goods which in turn improve the lives of the local people. Due to these investments, more institutions have emerged, and these include the higher learning institutions (Rholetter, 2015). We would say that the foreign firms have also enhanced the recent developments in the region.

Challenges faced by FDI

The foreign direct investors are faced with many shortcomings that do not affect the local investors. These challenges are in the form of government policies as the government usually impose high taxes for foreign investors. These taxes reduce the overall profit that the companies realize (Mooslechner, 2013). These companies still have a task of showing evidence that they will impact positively and will be advantageous to the host county’s growth and development. The companies have to show proof on the advantages they will provide to the country.

Another challenge comes in the labor and workforce. Most countries have a limitation that a foreign company has to employ the locals and some of these locals are not adequately qualified to work in these companies.

Finally, competition from the local companies is another challenge experienced. If another local company is producing the same goods as the foreign one, the race that the international company will face will be very high. It has to create incentive programs which will be aimed at attracting more customers and having paid a higher tax than the local company, then having incentives to attract customers, the overall profit will drop than the expected.

References

Balestra, P., & Negassi, S. (2012). A random coefficient simultaneous equation system with an application to direct foreign investment by French firms. Empirical Economics, 17(1), 205-220. doi:10.1007/bf01192484

Götz, M. A., & Jankowska, B. (2016). On Some Aspects of State-Owned Enterprises’ Foreign Direct Investments (SOEs’ FDI). Outward Foreign Direct Investment (FDI) in Emerging Market Economies, 118-140. doi:10.4018/978-1-5225-2345-1.ch007

Maric, K., & Shukarov, M. (2017). The Role Of Institutions In Attracting Foreign Direct Investments. KnE Social Sciences, 1(2), 374. doi:10.18502/kss.v1i2.672

Mooslechner, P. (2013). Why FDI? Re-inventing Economic Geography in Times of Globalization. Foreign Direct Investment in Europe. doi:10.4337/9781847208798.00023

Rholetter, W. (2015). Connecticut. Encyclopedia of Global Warming and Climate Change. doi:10.4135/9781412963893.n170

Shaver, J. M. (2014). Do Foreign-Owned and U.S.-Owned Establishments Exhibit the Same Location Pattern in U.S. Manufacturing Industries? Journal of International Business Studies, 29(3), 469-492. doi:10.1057/palgrave.jibs.8490003

Svetlii, M. (2014). Sustainable Foreign Direct Investments. Internationalization of Emerging Economies and Firms. doi:10.1057/9780230363663.0010

Zarsky, L. (2013). From “investor rights” to “sustainable development”? Challenges and innovations in international investment rules. Handbook of the International Political Economy of Trade, 135-151. doi:10.4337/9781781954997.00012

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