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Question
Examine the steps taken by the developing countries to attract foreign investment.
Solution
- 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.
- Companies who set up production units in the SEZs do not have to pay taxes for an initial period of five years.
- Government has also allowed flexibility in the labour laws to attract foreign investment.
- 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.
- 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.
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