Separating Politics from Foreign Direct Investment

Perhaps the title to this piece is misleading, as events have shown over the years that attempting to separate FDI from politics is a little optimistic. While the losers in the short term are investors, in the longer term they are the locations vying to enhance their economic development.  


It’s one thing where policy is involved…

In general terms, economic development policy will tend to encourage liberalization, which is likely to support FDI growth. Indeed, for better or worse, TPP (and TTIP) policy can only help to grow FDI. But the criticism of these agreements come from the inherent political strand in what they may achieve (i.e. the largest companies gain ever more influence). Without the politics, both of these trade agreements may well be more popular. But then perhaps by definition it’s impossible to reach such major agreements without them being in some way political?


But when policy is irrelevant….

This may well be the case, but what is arguably more unfortunate is where FDI takes the hit, simply for the sake of politics. A good example was when the UK’s regional agencies were suddenly removed in 2010, to be eventually replaced by LEPs, organizations covering much smaller geographies. Whether this turns out to be a net positive for FDI is debatable, but certainly the way the change occurred after the election, with no real plan in place at that stage as to what the alternative would look like, can only be viewed as a political maneuver.


A more recent example comes from the US, where despite another upcoming SelectUSA summit to reinforce that the country is ready to attract more FDI, some of the events of the election campaign are doing the opposite. Whatever your views on the politics, the rhetoric attached to the Republican campaign is hardly encouraging investment from certain locations. But ironically, Donald Trump says the UK is discouraging FDI through its political reaction to some of the comments...



From AllOutLocation