A Guide to Investment Climates Abroad

This month, we rolled out our 2016 Investment Climate Statements -- a comprehensive compilation of global economic information and an outlook of challenges and barriers for U.S. companies interested in doing business abroad.

Why are these statements important? These statements provide valuable information to assist U.S. companies in making investment decisions. Based on data from 2015, U.S. companies are already investing more than $300 billion abroad annually. This foreign investment bolsters the United States’ economy by supporting U.S. exports and sales in foreign markets. This investment abroad can also support the economies of developing nations.

Ambassador Marcia S. Bernicat with Chevron’s engineers inside the natural gas plant’s control room in Bangladesh. This plant represents the largest chunk of Chevron’s $1.7 billion in foreign direct investment in Bangladesh and supplies a large proportion of the country’s natural gas.  Chevron is the leading U.S. investor and leading foreign direct investor in Bangladesh. [State Department Photo]

At the Investment Climate Statements launch hosted by the Center for International and Strategic Studies in Washington, D.C., my colleague Kurt Tong, Principal Deputy Assistant Secretary of State, Bureau of Economic and Business Affairs and I joined a panel of industry leaders and academics to discuss how the Investment Climate Statements are an integral part of any business’s expansion strategy outside of the United States.

The Investment Climate Statements are prepared by diplomatic posts and missions around the globe, and provide economy-specific information for more than 170 countries on topics ranging from openness to investment, and performance requirements to dispute resolution.

What macro conclusions can we glean from the micro insights that the individual reports offer?  An informal survey of posts found that only 22 percent of posts saw a deteriorating investment climate, and many saw proactive government actions to address business concerns.  Thus, more than half of responding posts in Africa cited improvements in their host investment climate, and pointed not just to predictable (or not) positive factors like access to resources and political stability, but also to government moves to streamline and facilitate business registration.

One great example of a positive change in investment climate shared came from Jamaica.  The U.S. embassy there cited a positive direction for the investment climate, and noted that investors have responded: between 2012 and 2015, inward foreign direct investment in Jamaica grew by 52 percent.  The growth of BMR Energy is a concrete example of this positive trend. BMR Energy used OPIC financing together with support from the World Bank’s International Finance Corporation, to build a 36-megawatt wind farm in Jamaica, the country’s largest private-sector renewable energy project. The wind farm will help Jamaica reduce its dependence on imported fossil fuels and move toward its goal of generating 20 percent of its electricity from renewable energy by 2030. The wind farm has the capacity to provide power to 36,000 Jamaican households.

Of course, issues and concerns remain in many countries, and the reports help to highlight them. Corruption, complex and opaque regulatory environments, weaknesses in contract enforcement, and inadequate protection of intellectual property rights were among the negatives that posts cited, and that they continue to engage on with their host governments.

A construction worker on site of what will be the BMR Jamaica Wind Limited's upcoming wind farm.  In January 2015, OPIC provided a loan to help the company build, operate, and maintain a 36.3 MW capacity wind farm about 90 kilometers west of Kingston. This will be the largest renewable energy project developed by the private sector in Jamaica. [OPIC Photos].

In his 2011 statement on the United States’ commitment to an open investment policy, President Obama reaffirmed the United States’ commitment to treating all investors in a fair and equitable manner under the law and encouraged all countries to pursue such a policy. The Investment Climate Statements are just one way we aim to help American identify markets that are open to investment. But our efforts to do this don’t stop there. We also use other tools, including investment agreements, bilateral and multilateral dialogues, and technical assistance to ensure the conducive to treatment of U.S. companies.  All of these efforts ensure that our companies are treated in accordance with the rule of law, in a transparent manner, and with strong investor protections. After all, we maintain an open investment climate in the United States and we expect no less for our investors abroad.

About the Author: Lisa Kubiske is the Deputy Assistant Secretary for International Finance and Development in the Bureau of Economic and Business Affairs.

For more information:

U.S. Ambassador to Bangladesh Marcia S. Bernicat with the President of Chevron Bangladesh Kevin Lyon and engineers at Chevron’s natural gas plant in Bibiyana. [State Department Photo]
Posted by Lisa Kubiske
July 25, 2016

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