Why more countries woo foreign investors
When Mexico sells oil plots to foreign investors or China creates special zones of freedom for foreign firms, they do so for more than material gain.
Mexico opened its state-run oil industry to private competition for the first time in nearly 80 years on Wednesday, offering 14 blocks in the Gulf of Mexico for offshore drilling. The move ends a government monopoly over energy. Yet the historic reform was not done simply to boost petroleum production or the economy. President Enrique Peña Nieto also wants foreign firms to introduce new ways of doing business that can help curb large-scale corruption and encourage a spirit of innovation among Mexicans.
Other countries now see foreign investment as a way to bring benefits beyond mere material gain. This week, for example, Ukrainian Prime Minister Arseniy Yatsenyuk was in Canada asking investors to buy up state enterprises that are being put up for sale. He wants to break the corrupt grip of powerful oligarchs. Ukraine, he said, seeks the “good corporate governance” of Western investors.
In April, Indian Prime Minister Narendra Modi traveled to Germany and spoke of foreign investment as a global necessity.
“It is not just about financial flows, new technology or products. It is also about learning from each other; about seeing possibilities in new ways,” he said. “This is a time of political instability and economic challenges; and, threats of violence that are increasingly close to our homes. [H]umanity needs the solidarity and strength of international partnerships more than ever before.”
In Nepal, Radhesh Pant of the Investment Board speaks of foreign investment as having the ability to challenge “traditional thoughts and styles” while also helping a country stay competitive in global markets.
Over the past year, China has set up four free trade zones in Shanghai, Guangdong, Tianjin, and Fujian, aimed at attracting foreign investors and acting as “test beds” for new ways in finance and management. The ruling Communist Party hopes the special freedom allowed for foreign business as well as a stronger rule of law will create models in open governance that can spread to the rest of China. The zones also fit into the party’s current campaign against official corruption.
The social and moral benefits of cross-border investments are not new. But as leaders travel the globe to woo investors, they are more explicit in asking investors to help lift up a country in ways that are not only economic. This openness to new ideas can help cure social ills and also bring progress in unexpected ways.