Foreign Direct Investment (FDI) refers to the flow of capital from one nation (home state) to another (host state). Typically, this is done by acquiring shares in the locally established enterprise or by investing and establishing fresh ventures in the host state. In an era when globalization prevails, countries worldwide are scouting actively to attract FDI. Unlike traditional forms of debt financing, FDI serves as an ideal debt-free approach to economic development that ultimately facilitates trade, jobs creation, transfers of know-how’s and technologies in the host state.
Developing nations such as Belize, have realized the instrumental role that FDI serves in the path toward economic development. According to the Economist Intelligence Unit (2006), it was noted that a rise of one percent in the ratio of the stock of FDI (to Gross Domestic Product), will raise GDP by 0.4%. It is thus well illustrated that for every dollar of FDI attracted, it will contribute about $0.50 toward the overall production of national output – hence raising the economic growth by close to half percent.
In light of the above, the overall rationales for attracting FDI to countries such as Belize are well documented. To date, FDI has been observed as a key source to generate employments, boosting foreign exchange earnings, facilitate trade (local and international), and trigger innovation and productivity. In short, FDI is viewed as an efficient way to attracting up-to-date technology, management practices, and even an assured market. It is thus imperative that a favorable business environment, along with consistent public policies be in good order in the quest to attracting FDI. As is, Belize has done comparatively well in fostering such a business environment to attracting foreign direct investments!
BELTRAIDE is committed to maintain a positive investment climate through its mission to enhance Belize’s prosperity by fostering investor confidence, entrepreneurship, business growth and innovation. This is only achieved by being a catalyst for collaboration and optimization of trade and investment efforts. Upcoming we will be sharing a second part to this article, where the economic impact of FDI will be reflected! Contact us if you have any questions at 822-3737/0175 or email at beltraide@belizeinvest.org.bz.
belizeinvest.net 
August 18, 2012 at 5:18 pm
ICA is an international FDI Advisory actively working with governments across the Caribbean and Latin American region to promote effectiveness in FDI attraction. Countries in this region are fortunate that FDI growth has continued, albeit at a slower pace, since 2008, while other regions have experienced flatline results in FDI activity.
Certainly FDI offers many benefits, but a country needs to be prepared to support it in a sustainable way. What we typically find is that national economic development strategies are not cohesive enough to be effective to attract FDI in today’s very competitive market. In many cases multiple government stakeholder agencies are unaligned, and a power vacuum may exist. We encourage governments to establish a national competitiveness council bringing together all relevant government agencies, policy makers, law makers, and the business community. It becomes their responsibility to examine every detail of the approval and registration process of a new business coming into your country, and ensure that it is streamlined to be regionally competitive and up to international standards. And that means everyone – from the ministers who establish policies on financial incentives to the veterinary official who needs to admit a foreign executive’s pet dog.
Once you have established your streamlined process, you can then begin your attraction strategies, and market your ease of business capability as part of that campaign.
If there are incentives offered with respect to capital or income tax, then it may take several years before the effect of an investment will increase your GDP. Focus on those industries which promote innovation, high value training curriculae, and high density employment. These will create an immediate positive impact on your economy.
For more information or to expand on this discussion, please feel free to contact me at ralph@ic-associates.com.
August 20, 2012 at 10:44 pm
Dear Mr. Birkhoff,
Thank you for your comment and feedback! Definitely FDI needs to be streamlined with a country’s strategy to support it in a sustainable manner.
Definitely we will keep you in mind should we need expansion on this discussion.
Thank you once again!
Admin