Stability is key to investor confidence in times of covid2 min read . Updated: 22 May 2020, 10:44 PM IST
Open, fair, non-discriminatory business environment attracts foreign investment
Recently, there has been a lot of discussion in the Indian media about how to boost the economy, attract more foreign investment and promote local investments in the context of the covid-19 pandemic.
The sudden outbreak of covid-19 poses a huge challenge to the global economy and human health. G20 Leaders “commit to do whatever it takes, and to use all available policy tools to minimize the economic and social damage from the pandemic, restore global growth, maintain market stability, and strengthen resilience." In keeping with this consensus, economies around the world, including China, are taking active steps to boost their economy and expand investment. We hope the government’s actions will yield positive results, because it is very important not only for India’s recovery and growth, but also for the global economy. G20 leaders, in the meanwhile, “reaffirmed their goal of achieving a free, fair, non-discriminatory, transparent, predictable and stable trade and investment environment and maintaining open markets." This is also a crucial point. Not only because “now more than ever is the time for the international community to step up cooperation and coordination to protect human life and lay the foundations for a strong economic recovery and a sustainable, balanced, and inclusive growth after this crisis", but because to any economy that wants more foreign investment, it squarely points out the importance of keeping trade and investment environment “free, fair and non-discriminatory, transparent, predictable and stable".
An open, fair and non-discriminatory business environment is the key element to attract foreign investment. Where companies choose to invest and operate depends on economic fundamentals and business environment of a country/region.
Enterprises make choices based on market principles and “vote" with their feet. The most important concerns include whether the economic growth is stable, whether the infrastructure is perfect, whether the investment opportunities are equal, whether the treatment is fair, and whether they are friendly to foreign investments. Adopting discriminatory restrictions against certain foreign investments on grounds of ambiguous, trumped-up and even political suspicions, and interfering with the normal business investment behaviour at wide range and without fair distinctions, is very likely not able to achieve the desired policy results in the end, but instead makes domestic enterprises and local economy the biggest sufferer.
Furthermore, unreasonable, discriminatory and arbitrary foreign investment restriction policies are to have a ripple effect and a chilling effect, arouse doubts about the overall stability. In the face of the economic downturn caused by the epidemic, countries should work together to create a sound investment environment. In the process of further attracting foreign investment in India, an open, fair and non-discriminatory business environment should not be neglected as the core policy element.
Li Baijun is Economic and Commercial Minister at Embassy of China in India. The views here are his own and do not reflect those of Mint.