HCMs can target by investment motivation, such as market-seeking, resources-seeking, efficiency-seeking and strategic asset-seeking, especially as investment motivations might be associated with particular home-country effects. For example, market-seeking OFDI can lead to enhanced home-country exports, resources-seeking can help ease home-country scarcities of natural resources, and strategic asset-seeking can induce know-how transfer and industrial upgrading in the home country. Particular caution might be necessary when targeting efficiency-seeking OFDI, as it can increase exports of intermediate goods but also result in offshoring.
Targeting by investment motivation could become even more granular by focusing on the individual investment strategies of firms. This could take into consideration whether specific strategies adopted by company managers lead to investments that align with development priorities and promise to benefit the home economy. One example would be an OFDI strategy aimed at integrating a company into regional or global value chains (UNESCAP 2020).
Key insights
- HCMs can be targeted at investment projects with particular motivations and strategies, such as market-, resources-, efficiency-, or strategic-asset seeking OFDI.
- Targeting by investment motivation often focuses on resources-seeking, technology-seeking or market-seeking investments.
- Targeting by investment motivation tends to involve HCMs offering financial support.
Interactions
B3) Investment motivation: Home-country measures can be targeted at investments with specific motivations.
C4) Financial support: Financial support can focus on investments with specific motivations, especially market-seeking, resource-seeking or strategic asset-seeking.
C5) Fiscal support: Fiscal HCMs can support OFDI undertaken for specific purposes and motivations, such as technology- or resource-seeking.
Existing Country Practices
Targeting by investment motivation in Japan: JBIC’s overseas investment loans programme encourages projects that contribute to developing or securing interests in resources of strategic importance to Japan. JBIC engages in equity participations in developed countries only if the financed projects contribute to developing or acquiring resources of strategic importance to Japan, or to maintaining and improving the international competitiveness of specified Japanese industries.
Targeting by investment motivation in the Republic of Korea: Korea Eximbank’s overseas investment loan scheme covers 100% of the required funds for natural resources development projects, but only 80% or 90% for other projects. Its direct equity investment scheme supports projects that facilitate the export of goods and services, engage in natural resource development or strengthen the international competitiveness of Korean firms.
Targeting by investment motivation in Malaysia: Malaysia’s tax incentive for overseas acquisitions is aimed at enhancing access to advanced technologies. MATRADE’s Services Export Fund offers grants to help the expansion of Malaysian services exports and support companies to enter foreign markets.
Targeting by investment motivation in Singapore: Singapore’s Enterprise Development Grant (EDG) programme supports companies from Singapore expand into overseas markets.