Federal And State Programs And Other Incentives

1416 WordsApr 29, 20166 Pages
Federal & State programs and other incentives that attract IFDI The desire to attract foreign direct investment causes countries to engage in competition with each other. Many regions, counties, and states have enacted policies to incentives and established agencies to promote investment so as to encourage FDI. The incentives are of financial and fiscal nature. Fiscal incentives are designed in such a way that they reduce the tax burden of companies and includes tax concessions that are usually in the form of tax holidays, reduced income tax rates, exemptions from import duties, accelerated depreciation allowances on capital taxes and duty drawbacks on exports. Financial incentives, on the other hand, consist of direct contributions to companies from the government. Financial incentives include subsidized loans, grants, loan guarantees, government insurance at preferential rates and publicly funded venture capital participation in investments that involve high commercial risks (Dadush, 2013). Authorities participate in a fierce competition to attract foreign direct investment in order to create jobs and help build the local economy. An example of a successful case is the BMW plant in the state of South Carolina which was constructed in the port of Charleston, which was previously under-utilized. The BMW Company received incentives from the United States government amounting to $130 million which included tax incentives, job training, and road improvements. In return, BMW
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