Foreign Investments In Emerging Markets:
zeal to attract foreign investment, governments in emerging markets
offer tax breaks and subsidies that can cost them millions.
Simultaneously, they enforce rules to protect inefficient domestic
companies and to ensure that local economies benefit from the new
business. McKinsey research finds that these incentives and
restrictions are unnecessary, ineffective, and, in some cases,
Foreign investment benefits the local economy in almost all cases.
Moreover, foreign investors say that government funds would be
better used to improve the local infrastructure than to provide
The wealth generated by India's fast-growing information technology
and business-process-outsourcing industries shows that the country
has started living up to its economic potential. Unfortunately, they
produce just 3 percent of GDP and employ less than one-half of 1
percent of the non farm labor force.