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What Is an Inward Investment?

Foreign investors financing the construction of a new facility is an example of inward investment.
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  • Written By: Mary McMahon
  • Edited By: Kristen Osborne
  • Last Modified Date: 17 November 2014
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Inward investment is foreign investment in a local economy or its products. This can contribute to wealth and job creation by providing an external source of funding. Many nations have government agencies responsible for attracting inward investment while also balancing the need to support domestic enterprises. Investors can include individuals, companies, institutions, and other national governments.

With inward investment, an investment opportunity such as reduced taxes, more favorable wages, or access to natural resources is identified by a foreign entity. This entity may invest in the construction of facilities in the local community and can also be involved in investment activity like supporting the development of new domestic companies. In nations with limited access to cash, inward investment can increase liquidity and raise the standard of living for people in the community by providing a foreign source of wealth. In regions where development is stalled, infusions of fresh cash can be highly beneficial.

Criticisms of inward investment usually revolve around cases where national governments encourage foreign investment at the cost of domestic firms. This can include situations where foreign investors receive favorable treatment or assistance and domestic companies do not, making it harder for them to get established and survive. Critics may also be concerned about long-term sustainability with inward investment. A company might, for example, establish a factory and close it a few years later when the laws change or a natural resource is depleted.

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Companies interested in investing overseas can find resources by talking directly with national governments about investment opportunities. Individual communities may also reach out to potential investors to attract them to their regions with incentives like relaxation of regulations pertaining to business taxation, employee wages, and so forth. A company interested in inward investment may be able to negotiate a deal by providing the community with information about the services it has to offer and demonstrating interest in investing.

The flow of wealth to and from various nations can be tracked in many different ways to see how inward investment affects communities. Many nations keep detailed statistics on investment activities in their borders to determine the value of foreign investment and investors may maintain their own data on the benefits they provide to foreign countries through their investment activities. Much of this information is available to members of the public interested in seeing where companies invest and how those investments work out in the long term.

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