Few subjects polarize public opinion as much as the role of globalization in developing countries.
The primary considerations when they invest abroad are the quality of the infrastructure and the labor force, the size and growth of domestic market, and the accessibility of the location. In theory if all else were equal, financial incentives might sway an investment decision. But all else is never equal, particularly when companies weigh the dozens of considerations factored into international investments.
Hyundai executives, for instance say that the top three factors in their decision to build a plant in Tamil Nadu were availability of a supplier base and skilled labor as well as the quality of infrastructure. The generous financial incentives Hyundai received were only as important as proximity to a port. Land subsidies were even less significant.
Foreign direct investment, its new skills, new technologies, and new jobs-all of which increase their standard of living. Detractors contend that corporations too often demand special treatment for their export businesses, push back on environmental regulations, seek to avoid taxes, and resist more costly labor market rules in the countries where they invest.
Certainly, not every corporation makes its foreign direct investment contingent on tax breaks, incentives, and regulatory exemptions. But those that negotiate hard with the governments of developing countries may want to rethink that approach.
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