International Relation and Global Economy for Government Stability

Question: Discuss about theInternational Relation and Global Economy for Government Stability. Answer: Introduction Foreign direct investment in a country is one of the most important approaches to increase the economy of the country. However, to strengthen the economic condition of the country a struggle occurs between the countries as every country wants to attract the foreign investors. Foreign investors play a crucial role in developing the economy of a country. Since 1914 the foreign investment process has been evolving rapidly. However, foreign investment provides the alternative products and also maximizes the supply of the essential products through the import mechanism (Sharma 2017). Often policies that are developed by the government affects the foreign investment as these are favorable for the local investors than the foreign investors. On the other hand, double taxation influences the foreign investors negatively while investing in a country. This study deals with the potential factors involved in influencing the foreign investment in the context of Singapore and other countries. Factors Influencing Foreign Direct Investment Various factors are involved in the foreign direct investment since 1914 that leave both negative and positive effect on the foreign direct investment in different countries. Government stability Stable political environment and the government is necessary for the foreign investment in a country. However, the foreign investors always look for the country that has a stable government and trade policies that are favorable for them (Pathan 2017). Therefore, it is essential for the government to support the foreign investment thus the investors do not fear to take over by the foreign government and they are able to expand their business. As for example, Singapore is one of the most politically stable country and important for the foreign investment. The Ruling People Actions Party of Singapore is stable since 1959 that offers a big scope to the foreign investors to invest in their country. On the other hand, Singapore is an independent country that provides more opportunity to the foreign investors. Election held in the Singapore after 6 years, which ensures the political stability, rules, and regulation of the government that are essential for the foreign investors (gov.uk 2017) . Government policies Government policies should be flexible for the foreign investors as strict government policies may affect the business expansion of the foreign investors. However, government policies of a country often provide scope only to the local investors rather than the foreign investors, which influence the foreign investors negatively in this country (Sharma 2017). As for example, Singapore government keeps the trade dependent economy that includes open investment regime with some restrictions in terms of financial service. According to the World Bank's report, Singapore is considered as the second country after New Zealand where the foreign investors can expand their business easily. Singapore Free Trade Agreement allows the foreign investors to maximize their market share in a flexible manner. The government of the Singapore offers the free market to the foreign investors that influence them to expand their business in this country (export.gov 2017). Economic Stability Economic stability is another factor of the foreign direct investment in a country. However, if the people of a country are not economically strong then they will not able to purchase the product from the foreign companies (Li, Huang and Song 2017). On the other hand, if the country has low economic growth then it leads the foreign investors to get the opportunity to invest in such country as it will essential for economic growth of such country. As for example, the economy of the Singapore is open and its GDP is US$ 55,000 per capita that is higher than many OECD countries. Hence, this country will be a good scope for the foreign investors to expand their business in such country. Market scope The market scope is a big factor of the foreign direct investment (FDI) in a country. The foreign investors need the scope to expand their business both domestic and international market of a country (Bokpin 2017). Expansion of the business in both domestic and international market leads the foreign investors to cut their production cost and they get an opportunity for the product diversification. As for example, Singapore gets the place among the top ten countries that are associated with FDI. However, this country gives its all effort to attract the foreign investors and develops a good trade environment. However, the foreign investors find a promising market in the Singapore for the many businesses. As for example, this is a good sector for oil, gas, aircraft, software and educational industry. Therefore, this country offers skilled employees and high demand in the domestic and international market. The current market of the Singapore shows high demand for oil and gas products, wh ich allow the foreign investors to invest in their countries in order to get a good return on their investment. Skill of the labor and low wage Labor skill is a vital factor that influences the FDI in a particular country. Foreign investors look for the country where they get high skilled labor with low wage (Hassan and Nassar 2017). In comparison to the US, the labor wage is low in Singapore that gives a big opportunity to the foreign investors to invest in this country. However, high skilled labor with low wage leads the foreign companies to enhance their productivity by cutting their production cost. Hence, people of the Singapore are highly educated and technologically advanced in the recent years. This is a big factor that attracts the foreign investors to expand their market share in this country (Danakol et al. 2017). However, the aim of the Singapore government is to improve their economic condition for this reason they use their skilled people as the resource to gain the concentration of the foreign investors. Rate of the tax High tax rate often resists the foreign investors to invest in a country. Hence, foreign investors choose the country for their business expansion that possesses low tax for the foreign business (Adhikary and Adhikary 2017). In the context of Singapore, they offer good trade environment to the FDI while the tax rate is varied based on the annual income of the foreign companies. Singapore government charges 8.5% tax for those foreign investors having annual income up to S$300000. On the other hand, the foreign companies having annual income above S$300000 need to pay 17% tax on their income. This is a good taxation policy of the Singapore government that influences the foreign investors to start their business in this country as they have to pay tax based on their income. Culture and social lifestyle The culture of the country and the lifestyle of the people is a big element that affects the foreign investment in a country. However, if the country consists of high-class people then it is a good scope for the foreign companies (Saidi, Mchirgui and Hammami 2016). On the other hand, cultural diversification is another part that influences the foreign investment in a business. Singapore includes a mixed culture of Western and Asian culture. However, some countries only follow either the western culture or the Asian culture that resists the foreign investors to bring product diversification in a country. Hence, the lifestyle of the people and the mixture of Western and Asian culture in the Singapore give a golden opportunity to the foreign investors to launch different products in this country that will enhance their sales revenue generation. Return from the investment ROI or return on investment is the potential factor of foreign direct investment in a country as it identifies the profit that the investors get against their capital (Saini, Madan and Batra 2017). However, if the foreign investors do not get the significant return on their investment then they will not be interested in a country. Since 1914 the ROI is a crucial factor of foreign investment as based in it the profitability of the investors in a foreign country can be counted. The return might be consistent or it could be enhancing over the time. In the context of Singapore, there is good opportunity to get the significant return on the investment as the GDP is higher in this country. There is a high demand in the domestic and international market of Singapore, which ensures the good return on the foreign investment (Hlavacek and Bal-Domanska 2016). Thus, in the recent years, many foreign investors come from the different countries and invest in the Singapore market in order to get th e highest return than other countries. Therefore, the favorable trade policies of the government of Singapore ensure the foreign companies to get their investment back as their investment is safe in this particular market. Conclusion The entire piece of work reveals the different factors influencing the foreign investment in the context of Singapore market. However, since, 1914 the FDI process has been evolving based on the nature of different countries. Hence, it has been found that government stability and trade policies of a particular country leave a big effect on the FDI. In the context of Singapore, the stable political environment and the flexible trade policies trigger the opportunity for the foreign companies. Therefore, the economic condition of such country is good that ensures the good earning capacity of the people. Therefore, the taxation policy is also favorable for the foreign investors in such country that is based on their annual income. The foreign investors get a chance to have a significant return on their investment in this country, which influences then positively to invest in this country. References Adhikary, B.K. and Adhikary, B.K., 2017. Factors influencing foreign direct investment in South Asian economies: A comparative analysis.South Asian Journal of Business Studies,6(1), pp.8-37. Bokpin, G.A., 2017. Foreign direct investment and environmental sustainability in Africa: The role of institutions and governance.Research in International Business and Finance,39, pp.239-247. 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