Question

Examine the steps taken by the developing countries to attract foreign investment.

Answer 1

1. Industrial zones, called Special Economic Zones (SEZs), are being set up. SEZs are to have world class facilities: electricity, water, roads, transport, storage, recreational and educational facilities.
2. Companies who set up production units in the SEZs do not have to pay taxes for an initial period of five years.
3. Government has also allowed flexibility in the labour laws to attract foreign investment.
4. Instead of hiring workers on a regular basis, companies hire workers ‘flexibly’ for short periods when there is intense pressure of work. This is done to reduce the cost of labour for the company.
5. Investing in their transport network is another way for developing countries to entice MNCs for foreign investments because a better transport network lowers operational costs and reduces wear and tear.