In this age of international trade, it’s common to hear people talk about how their country might encourage foreign investment and thus, help raise their folk’s standard of living. The latter is perhaps just an offshoot of the benefits of foreign investment, but investment coming abroad can indeed have a positive impact on any country’s economy.
It’s a Win-Win Situation
When two countries engage in bilateral trade, it is, theoretically a win-win situation for both parties as a whole. These benefits are best felt in the movement of the economy, whose positive effects naturally trickle down to the common people through better opportunities for sustainable personal income.
Here are a few of the ways in which an influx of foreign capital can be beneficial to two bilateral partners.
It Raises Opportunities For Jobs For Locals
Foreign capital can only mean money that goes towards business. In other words, foreign nationals will inject money into a business that will be more or less owned by them, or shared with local businessmen as well.
Every business will require somebody to work for them and that means only one thing – jobs for local workers. True, each foreign-owned business will have one of their own in a high ranking position in the company, but the rest of the workforce will predominantly be made up of locals.
Any person who is savvy with how economics work will already understand what the second benefit of foreign investment will be.
The Government Will Earn Taxes
When there is income, there is always one silent partner in it all – the government.
With the jobs generated by foreign investors, the government can earn revenue from income taxes. This will be shouldered by the employees, of course, depending on the laws set in place by the local government. In Thailand, for instance, workers who earn THB150,000 per year are subject to 10% income tax, but those earning less are exempt.
In addition to that, businesses are also required to pay tax to the government, on top of the personal income tax their proprietors have to pay as well. There could be exemptions, depending on the actual stipulations of the two nations’ bilateral trade agreements, but there will always be tax involved, in one form or another.
Foreign Makes the Nation More Attractive to Additional Investment
With the funds realized by the taxes paid by both the employees and the business, theoretically, the government can now move towards making investments of its own in terms of infrastructure.
Infrastructure is needed in order to improve the way of living of the local people and the movement of resources and capital, as well as foster development of the local area. Development also brings in more investors – they may not be businessmen, but investors in real estate!
More investment, more taxes and funds for the government, which can then be used for further development or for welfare projects, among others.
Indeed, foreign investment, when well regulated by the authorities, can be very beneficial for all involved.
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