The first part featured in our April 2011 issue highlighted key factors such as Political Stability, Economic Strength, Attitude of Welcome and Government Policies. The remaining key factors are:

(5) INFRASTRUCTURE
Once the Asian investor is satisfied with factors 1 to 4, his next concern will be infrastructure, more specifically its availability, reliability and cost, all of which will directly affect his manufacturing costs.

In this context, the word “infrastructure” covers a host of items:

1. Land Issues:
   • An investor’s construction costs could be seriously affected by the nature of the land, e.g. filled land, cut land, etc.
   • Legal statutes of ownership of property should be well defined. Ownership (Freehold Status) of land, both individual and residential, is an added advantage in attracting FDI. However, what is more important is the speedy approval of land titles and the investor company’s ability to charge these to banks as guarantees against loans, etc. These are greater overriding factors, of importance to investors, than the stark issue of ownership per-se.
   • Land Lease periods: Length/duration of the lease period is a critical factor.
2. Logistic:
   Availability of roads/rail, ports and shipping – from the ports (air and sea) to the area of production and to main markets. Also, how prone are the land and inland transport routes to floods, landslides and other natural or man-made catastrophes, e.g. terrorist attacks.
3. Electricity:
   Not only the availability and costs but also issues such as voltage fluctuations, brown outs, black outs, etc.
4. Water:
   Availability, quality, cost and reliability of supply, and in some cases, treated or untreated water.
5. Telecommunications:
   Telephone, fax, email services, etc. for internal and international communication. Also, for advanced operations, the availability of computer linkages from factory direct to parent companies abroad and international markets.

Critical to points (a) to (e), and other factors needed for operations would be the cost of these facilities. How competitive are the costs when compared to neighbouring environments as well as the Asian environment?

(6) LABOUR
The assumption that Asian companies are investing in less developed countries because of cheaper labour is true to a certain extent. Labour in Least Developed Countries (LDCs) could sometimes be cheaper than those in developing Asian nations. However, a survey of West African nations has revealed that some West African nations boast labour costs that appear higher than those in Asian nations such as Indochina, Indonesia, India, China, etc.

Apart from availability and labour costs, other key considerations include education standards, trainability of workers, work ethics of the population, harmony of the labour environment, (relatively free of labour/management conflict), influence of politics and politically-free labour movement or labour unions, availability of professional and technical personnel among locals, productivity levels that can be achieved due to work culture, etc.
(7) BANKING AND FINANCE
Are all the instrumentalities required for modern international trade and investments available?
Are there sufficient numbers of banks with international connections to conduct competitive international business? What are the costs of funds and how difficult is it to access these funds?

Are branch banks of major trading and investment nations operating in the country? A foreign investor with the knowledge that a bank from his country or a multinational type bank is located in that country will be more confident of his investments.

(8) GOVERNMENT BUREAUCRACY 
It does not matter as to how efficient a government thinks its investment machinery is. What is critical is the perception of businessmen, especially those already operating on the ground. What is the extent of bureaucracy, not only at national or central levels, but also at district, local council and municipal levels? Another factor would be the presence of pro-investor “Government to Government” agreements such as Investment Guarantee and Double Taxation Treaty.

Corruption
Unless there is political will to wipe out corruption, this will continue to be the cancer that sucks at the soul of nations trying to move into rapid modes of growth by attracting FDI. Governments from LDCs interested in reducing corruption should examine the concept of “e-governance”, for this can be a strong ally in the fight against corruption.

(9) LOCAL BUSINESS ENVIRONMENT
This expression covers a multitude of factors, including local lawyers, secretarial service, accountants, architects, building contractors, local consultants, ancillary and supporting industries/facilities and their overall quality and costs. Just-in-time products and the Zero Inventory System may provide the competitive edge. Is there a list of potential partners from which the investor can choose from, or conversely choose to ignore if he has his own source of contacts for partners? Finally, are local businessmen investing in their own country, holding back or moving funds abroad?

(10) QUALITY OF LIFE
Last, but by no means least, is quality of life. What locals and long-staying expatriates accept as normal can be quite a “culture shock” to expatriate staff of new investors proposing to set up a project in an LDC. Considerations include the availability of education facilities for expatriate children, medical and health facilities, proper housing, safety of family members, etc. Keeping in mind that with “economic conditions” being more of less equal in several LDCs or African nations, the country that provides a better quality of life may have the competitive edge to attract the Asian Investor.

THE 10 PLUS FACTOR: TAX HOLIDAYS
The 10 factors above do not include the issue of Tax Incentives or Tax Holidays. This underscores the fact that although Tax Holidays are critical to the investor, it is not a given and becomes important only if he makes a profit. The 10 checkpoints above are critical to the investors’ ability to make profits. However if a number of LDCs offer equally competitive viable/profitable bases to the Asian investor, than the issue of Tax Holidays or the amount of Corporate Tax he has to pay, will be a deciding factor in his decision to invest.

SPECIAL NOTE
If you would like to know more about investing in developing nations, or wish to improve the investment environment of your country and attract Asian investors, please contact:
Dato’ J. Jegathesan, Chief Executive Officer
JJ Ishwara Connect (JJIC) Malaysia
Email : jjegaic@yahoo.com • Office No. : +603-2283 1559