Global expansion into new 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
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 prediction of global economic growth in 2021. Caution by investors is reinforced by the continuing high rankings of countries with developed economies in which investors plan to invest.
For the ninth consecutive year, the U.S. continues to rank #1 on the Index as the market in which investors surveyed would expect to invest in the next three years. Canada has ranked #2 in 2020 and 2021, and together with the U.S., the North American market dominates as the top destination for foreign direct investment.
What are 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 most common in countries with developed 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 investors considering a location for foreign investment. actors highly ranked or making a significant move up in the 2021 rankings include efficiency of legal processes, transparency of regulations, lack of corruption, strong investor and property rights, government incentives and an 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. supports its #1 ranking as the top market to invest in for almost a decade.
How to Invest
When considering a foreign investment in the U.S., government organizations at the federal and state levels have programs to assist investors in the process of planning and executing an expansion. These programs provide a wealth of information, introductions to customers and suppliers, incentives and other services to companies expanding in their area.
At the federal level, SelectUSA is a U.S. Department of Commerce program to facilitate business investment into the U.S. 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 an investment in the U.S.
Beyond economic development assistance, investors need access to information about the requirements and costs of doing business in the U.S. Working together with a network of advisors experienced in early stage expansion is key to a successful expansion.
For example, there are specific steps for establishing a U.S. legal entity and setting it up for operation; working with U.S. advisors in the legal, accounting and tax areas is crucial to starting off right and avoiding costly mistakes or missed opportunities. Since U.S. payroll will always be different from an investor’s home country, it’s important to work with a U.S. 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 U.S. 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 U.S. operation. Therefore, be sure to put a U.S. accountant experienced in foreign direct investment at the top of the list to assist with your U.S. expansion plans.
To Learn More
We have been supporting clients with international expansion for decades and have deep experience in foreign direct investment and the complexities of global tax and accounting. Specializing in European and Chinese companies coming to the U.S. and companies expanding to Mexico, we’re here to help you compete in the global marketplace. Contact us today to learn more.