Government Investment Policy

investment made by a company or individual in one country

in business interests in another country, in the form of either establishing business operations or acquiring business assets in the other country, such as ownership or controlling interest in a foreign company.

The key feature of foreign direct investment is that it is an investment made that establishes either effective control of, or at least substantial influence over, the decision making of a foreign business

Foreign direct investment frequently involves more than just a capital investment. It may include provision of management or technology as well.

offers three basic concepts to help governments clarify the position

of their countries in the world economy, set priorities and implement a country’s long-term vision:

1. Investment policy is not about choosing between foreign and domestic investment. It is about connecting them both through local, regional and global value chains.

2. An investment is not a transaction; it is a relationship.

3. Not all types of investment are the same.

This means regulatory reform should not only focus on domestic laws but also pursue coherence between the latter and international investment agreements which are increasingly governing domestic and international production.

Different types of investment have different effects on socio-economic development, and thus require different policies…Countries who can apply this framework to their investment policies and vision will have a logical backbone for implementing an investment strategy that could lead to measurable results.

An investment policy strategy needs to go beyond attracting initial investments – this is just one small part of the story. The real benefits to the state come later on in the relationship, when a country successfully retains investment and builds strong linkages with domestic businesses.

and vision will have a logical backbone for implementing an

investment strategy that could lead to measurable results.

For instance, Mexico’s aerospace industry was essentially non-existent in the year 2000, but now has grown to a $5 billion export industry that employs around 31,000 people.

The Ministry of Economy is coordinating a national plan based on the strengths of particular regions 118 in the country.

In addition, state universities are ramping up their aerospace design and engineering programs: Mexico now graduates 100,000 engineers annually, providing a skilled population of potential employees to power the businesses…

investment policies. An approach that works within one country for

one type of investment at one particular time may need to be continually revised, revamped, and reworked to take into account the changes or unique circumstances in an economy. By using and adapting a framework such as the investment reform map, governments can develop policies that work for their own countries.