Includiuragement Governments, both foreign and U.S.

, encourage foreign investment LO7 How and why

governments encourage foreign investment as well as discourage it. In fact, within the same country,
some foreign businesses may fall prey to politically induced harassment, while others may be placed
under a government umbrella of protection and preferential treatment. The difference lies in the
evaluation of a company’s contribution to the nation’s interest. The most important reason to
encourage foreign investment is to accelerate the develop ment of an economy. An increasing number
of countries are encouraging foreign investment with specifi c guidelines aimed toward economic goals.
Multinational corporations may be expected to create local employment, transfer technology, generate
export sales, stimulate growth and development of local industry, conserve foreign exchange, or meet a
combination of these expectations as a requirement for market concessions. Recent investments in
China, India, and the former republics of the Soviet Union include provisions stipulating specifi c
contributions to economic goals of the country that must be made by foreign investors. The U.S.
government is motivated for economic as well as political reasons to encourage American fi rms to seek
business opportunities in countries worldwide, including those that are politically risky. It seeks to create
a favorable climate for overseas business by providing the assistance that helps minimize some of the
more troublesome politically motivated fi nancial risks of doing business abroad. The Department of
Commerce (DOC) at www.doc.govis the principal agency that supports U.S. business abroad. The
International Trade Administration (ITA) at www.ita.gov , a bureau of the DOC, is dedicated to helping
U.S. business compete in the global marketplace. Other agencies that provide assistance to U.S.
companies include: • Export-Import Bank (Ex-Im Bank) underwrites trade and investments for U.S. fi
rms. www.exim.gov • Foreign Credit Insurance Association (FCIA), an agency of the Ex-Im Bank, provides
credit insurance that minimizes nonpayment risk caused by fi nancial, economic, or political
uncertainties. It includes insurance against confi scation, civil disturbances, and the cancellation or
restriction of export or import licenses. www.fcia.com • The Agency for International Development (AID)
provides aid to underdeveloped countries and has limited protection in support of “essential” projects in
approved countries and for approved products. www.usaid.gov • The Overseas Private Investment
Corporation (OPIC) provides risk insurance for companies investing in less-developed countries.
www.opic.goare high, and bribery is an untenable option. This issue is discussed in more detail in
Chapters 5 and 7.