Foreign direct investments play a key role in enhancing the development, the economic growth, and global integration. The importance of FDI provides benefit to countries with economic growth through the increasing of income, new job creation, higher wage, expertise, greater exports, skilled management and greater productivity through new technology. Thus FDI becomes the target for the developing countries to absorb the capital inflow and new technology to develop their economy through their own policies to attract FDI to invest. In this regard, “FDI may no longer be attracted to just the economic fundamentals of the host economy and therefore government developing countries have a greater role to play. Along with the policies that improve the fundamentals of the economy they also need to develop selective policies that aim at attracting more foreign investments (Banga, 2003).” Thus the governments need to more seriously take measures to respond the demand of the investors while more competition in attracting FDI is taking place from other countries.
It is to be noted that government in recent years have largely lowered restrictions to investment and opened up more and more sectors to foreign direct investment (UNCTAD 2002). The policies to improve the investment climate are more paying from the governments to catch up the foreign investors through the incentives, including monetary, fiscal, and regulatory policies. Thus, there is a big question coming up to the impact of these policies on foreign investors. In this respect, to achieve the goal of attracting FDI, Cambodia’s government works hard to improve its overall investment climate such as establishing the government-private forum to respond the demand of foreign investors, Strengthening the country’s legal framework, bolstered its institutions, liberalized the relevant regulations, providing investors with a guarantee neither to nationalize foreign-owned assets nor to establishing price controls on goods and services rendered by investors, granting them the right to freely repatriate capital, interest and other financial obligations. However, the level of FDI inflows to Cambodia is still low, compared with other countries in the regions. There are different factors which determinate FDI inflows. One of these factors is related to the government’s policies and the second one is related to the domestic market potential. So the policies and the domestic market potential will be raised to discuss and analyze in this topic.
Explanation:
Abstract
Foreign direct investment plays an important role in enhancing the economic growth in the developing countries. Cambodia, one of the developing countries, is working hard to attract FDI through improving the investment climate- creating incentive policies for foreign investors through fiscal, monetary, regulatory policies. Thus the purpose of this research aims at to show the outcome of the policies and improve its ability to attract FDI.
Cambodia undertakes a new policy of uniform treatment for all investors, domestic and foreign. The new law helped enhance increasing investment projects and gave wider opportunity for foreign investors to get benefit from their investment in Cambodia. The government policies make foreign investors more confident. These policies include fiscal policy exemption from taxes, monitory policy dealing with exchange rate, inflation etc. Regulatory policies concerned with the entry, ownership, exportation and repatriation, privatization and other relevant policies.
The study is divided into seven parts: First introduction, second: Outlook of Cambodia’s Macroeconomic, Third: Overall Economic Policy, Fourth: Cambodia Government Policies toward FDI, Fifth: The Role of Government Policies to Promote FDI Inflows, Sixth: Need Reform, Seventh: Conclusion.
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