Indonesia third most attractive investment site
JAKARTA (JP): Indonesia is the third most attractive investment spot for multinational companies after China and India, according to a study.
The survey conducted by Erns & Young International, a U.S. consulting firm which has offices in various countries, said that those three nations rank at the top of 10 emerging markets, including Mexico, Thailand, Brazil, Malaysia, Argentine, Hong Kong and Taiwan.
According to the survey, the report of which was made available here over the weekend, the primary reason why multinational firms invest in emerging markets is their large market potential, rather than low-cost labor.
Other primary reasons were the possibility of obtaining potential high rates of return, establishing strategic business locations and preempting competitors.
Nine of the 10 surveyed companies rate political stability as the most significant deterrent to overseas investments. Problems related to legal infrastructure and currency exchange controls are the next most often mentioned barriers.
"Access to large markets and expectations of higher rate of return is now the prime motivator of global expansion decisions," commented Jerry G. McClain, Ernst & Young's coordinator in Indonesia.
He said the survey clearly demonstrated that countries wanting to attract foreign investments need to provide a stable political climate, to improve currency stability and commercial infrastructure, and simplify regulatory requirements.
Tax
Regarding tax implications, the survey indicated that the tax regimes in emerging markets are seen as one of the top seven barriers to investments by all multinationals.
Most companies surveyed, including 89 percent of Japanese and 83 percent of European respondents, stated that they assess tax implications as part of their feasibility studies for global investments.
Around 64 percent of U.S. companies include tax considerations in the important first step of the investment decision process, according to the survey which was based on interviews with chief executive officers, corporate planning directors and international operators of 230 of the world's 1000 largest multinational corporations.
The study, entitled Global 1000 Investment in Emerging Markets, showed that over two-thirds of all multinationals expect to be investing more in emerging markets over the next five years, led by 48 percent from the United States, as compared to 15 percent from Japan and 38 percent from Europe.
In the shorter term, 41 percent of U.S., nine percent of Japanese and 36 percent of European multinationals plan substantial increases in investments within two years.
European and Japanese multinationals have been traditionally more active in investing in less developed countries than their U.S. counterparts, which are now planning to earmark a higher level of their foreign investments to these emerging markets, the study indicated. (hen)