The U.S is the top foreign investment destination again!
Global expansion into foreign markets is the key growth strategy for most companies around the world. Since the start of the pandemic, understanding the factors that influence where and how to invest in a foreign market has never been more critical.
Where to invest for foreign investors
According to the 2021 Kearney FDI Confidence Index (Index), global investors remain cautious following the changes to the world economy in 2020, even as vaccines bring some predictions of global economic growth in 2021.
Caution by investors is reinforced by the continuing high rankings of developed countries with established economies in which foreign investors plan to invest.
For the ninth consecutive year, the US market continues to rank #1 on the Index as the market in which foreign investors surveyed and would expect to invest in the next three years. Canada has ranked #2 in 2020 and 2021, and together with the US, the North American market dominates as the top destination for foreign direct investment FDI.
What are foreign investors seeking in established markets with the lingering uncertainty of the pandemic?
While tax rates remain ranked as the most influential factor in deciding where to make a foreign investment, technology, innovation, and research & development (R&D) follow closely behind. These capabilities are common in most developed countries with established economies. And with the steep acceleration of the digital economy because of the pandemic, they are critical to global expansion for most companies.
The Index also reflects the caution of foreign investors considering a location for foreign investment. Factors highly ranked or making a significant move up in the 2021 rankings include efficiency of legal processes, a transparent justice system, transparency of regulations, lack of corruption, strong investor protection rights, government incentives, and a business environment of security.
The high-ranking regulatory factors reinforce the desire for safety and stability to accompany the high-tech capabilities. The abundance of both in the U.S. market supports its #1 ranking as the top market to invest in, the world's leading economic power, the largest international financial centre, and the third-largest country in the world in terms of population.
The United States' strong points also include it being the world's largest recipient of foreign direct investment (FDI) with the US government's policies on taxation and regulation offer foreign investors wide freedom.
How to invest for foreign companies
When considering foreign investments in the United States of America, government organizations at the federal and state levels have programmes to assist investors in the process of planning and executing an expansion.
These programmes provide a wealth of information, introductions to customers and suppliers, incentives, and other services to foreign companies expanding in their area.
At the federal level, SelectUSA is a US Department of Commerce programme to facilitate foreign investments into the US. The SelectUSA Investment Summit held annually offers a full agenda and an impressive matchmaking platform for foreign companies to connect with economic developers, government officials, service providers, and each other.
SelectUSA also offers many events and services throughout the year, making it a great place to investigate a foreign investment in the US.
Beyond economic development assistance, foreign investors need access to information about the requirements and costs of doing business in the US. Working together with a network of advisors experienced in early-stage expansion is key to a successful expansion.
There are specific steps for certain foreign investments in the US, for example, establishing a US legal entity and setting it up for operation; working with US advisors in the legal, accounting and tax areas is crucial to starting off right and avoiding costly mistakes or missed opportunities. In country comparison, a US payroll will always be different from an investor’s home country, it’s important to work with a US accountant and payroll provider. They will help you learn and execute the required and customary practices to attract the talent you need, understand the HR-related costs for your business plan and avoid penalties from compliance mistakes.
Other important advisors include those in the immigration, banking, insurance, and talent acquisition space. Ultimately, it should be a US accountant and tax advisor who will consult on the results from all operational decisions as seen in the books and tax filings for the new US operation. Therefore, be sure to put a US accountant experienced in foreign direct investment at the top of the list to assist with your US expansion plans.
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