How Opening a Country Up to Foreign Investments will Affect its Citizens

Posted in Banking and Finance

If a country is to open up its markets to foreign investors, its citizens will begin to see a rise of economic prosperity. By opening up the market to foreign investment, a country will notice a balance between large and small business corporations. As foreign investors begin to flood the market citizens will notice that as opposed to government and public investments into businesses, which tend to focus far less upon small business, foreign investors may actually take the time to evaluate a company and choose whether or not to invest in it.

Foreign Investments

What does this mean, then? Our online accounting degree tells us this means that small businesses have a better chance at being prosperous. Foreign investments, which believe that a company will become successful, will help to make said company successful. The main attribute to the failures of small business in countries that do not allow foreign investments is that they rely on the government, and its citizens for support.

When foreigners get involved, perhaps those with a vision that a particular company could produce a substantial export, more funds are available. Therefore, more opportunities may be capitalized on. When small businesses do well, they grow. As a small business is in transformation, it is rapidly gaining capital. By the time that a small business has become large, as in a major company, a great deal of money has been generated, and, although the initial investment was made by foreigners, that wealth is given back to the people. Not only does this include the product or service generated, but in the increased tax revenue collected by the government. It would be simple to conclude, then, that foreign investments allow for a more prosperous economy, and a base of citizens which is much better off.

However, foreign investments have downsides as well; especially for a civilian population. As a country invests in a small, or even large corporation, two different types of relationships can arise which can detract from revenue, and jobs of the company, and the country. For example, if a foreign investor helps to initiate a small business by buying up the majority of that company’s stock, and the company begins to grow, then as the main shareholder and proprietor of the business, at its highest point, may be the investor. The investment which brought about the rise of the company may take it away altogether. Likewise, if a foreign investor were to put stock in a company that was in the process of, or is already thriving, then that company will have made contacts with a foreign market. Once contact is established, it is inevitable that there will be immigrant communities that turn to these companies for jobs. If foreign involvement is established, then it is easy to assume that foreign workers from respective countries will begin to play active roles in said company’s labor force. If foreign workers fill up positions, then the natives of the business will lose out on their chance to work. This then eliminates opportunities for citizens, or causes others to lose their jobs to migrant employees who will work more for less.

Additional to the possible job loss comes a greater and deeper threat; Outsourcing. A foreign investor may pave the way for a business to relocate themselves outside of their own country, usually for incentives on taxes. Contrasting to information described earlier, a country may take a double whammy from foreign investors coercing a company to outsource. In this scenario, not only does the move cause many to have to migrate out of the country, or lose their jobs, but it also saps money away from the government, and in turn, the people, as the business is no longer having to pay, or paying as much, to the country it originated from. This hurts citizens.

It is important to note that foreign investment is a double sided coin. On one hand, foreign investments, if permitted, can allow certain business ventures to prosper, which equates to the betterment of the people as a whole. On the other hand, foreign investments can be an infectious worm which drains the life out of a countries’ economy, and its citizens, little by little, over time.

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