Country as Production Location

• Businesses consider which country to base production in when expanding operations.
• Renault has production plants in Morocco, Slovenia, Turkey, Russia, Romania, and Argentina.
• Only about 25% of Renault cars are made in France.

Manufacturing Competitiveness

• In 2016, China was the most competitive nation for manufacturing.
• Around 29% of China's GDP comes from manufacturing.
• Labor costs in China were $3.28 per hour.
• Approximately 93% of China's exports were manufactured goods.
• The USA was expected to replace China at the top spot by 2020.
• A nation's talent is the most important driver of manufacturing competitiveness, followed by cost competitiveness, productivity, and the supplier network.

Production Costs

• Businesses locate factories in countries with low production costs to gain a competitive edge.
• Main production costs include labor, energy, raw materials, and land are generally lower in Asia.
• Low wage costs attract businesses, especially those employing a large labor force.
• In 2017, Chembio Diagnostics moved some production to Malaysia after a minimum wage rise in New York.
• Labor costs in traditionally low-cost countries like China have started to rise.
• The lowest wages recently were found in Myanmar, Bangladesh, and Cambodia, but these locations may be politically unstable and have poor infrastructure.
• Rising energy and land costs affect business location plans; for example, rising energy prices in Europe in 2013 negatively impacted business location decisions.

Skills and Labor Force

• Businesses must consider both the cost and quality of labor when selecting locations for production facilities.
• Businesses consider whether the labor force has the skills to maintain quality standards.
• Cheaper labor may mean unskilled and poorly educated workers, requiring substantial investment in training.
• India is becoming an attractive location due to its mix of high- and low-skilled labor.
• India has a large market of 1.2 billion consumers with rising incomes and a significant number of university graduates.
• Some businesses have moved production back from east Asia, known as reshoring, partly due to poor quality control in east Asian factories.
• In 2017, reshoring and foreign job announcements increased by 170,000 in the USA due to lower taxes and less strict regulations.
• The USA needs to become more competitive to bring back 10% of the 5 million jobs that have gone offshore.
• Businesses must ensure enough workers are available near the chosen site and consider future workforce needs if facilities expand.

Infrastructure Quality

• Infrastructure quality is critical when choosing a country for a production location.
• Developing countries with cheap labor may have inadequate infrastructure to support large production facilities.
• Poorly constructed and maintained roads can slow transportation of goods and materials.
• Areas at risk of natural disasters, like flooding, can disrupt the supply of vital components.
• Good broadband network access is increasingly important for businesses needing rapid and reliable Internet connections.
• Some countries may still be developing their broadband networks or have slow and unreliable networks.
• Lack of modern airports and ports can hinder business travel and shipping goods.
• Railway networks may be underdeveloped, posing a problem for transporting large or heavy goods.
• Lack of investment in education can affect human capital quality and discourage managers from relocating.
• Differences in hospital quality may deter senior employees from moving.
• Healthcare quality impacts human capital quality and health.
• A lack of commercial services and suppliers may discourage a business from locating in some countries.
• Businesses need access to printers, IT support, bankers, insurance providers, advertising agencies, cleaners, maintenance companies, and component manufacturers.
• Businesses must identify infrastructure needs and assess if a country can meet them before locating a factory overseas.

Trading Blocs

• Some businesses locate production in countries within a trading bloc to avoid trade barriers like tariffs and quotas.
• A business inside a trading bloc can sell products to any member of that bloc without trade barriers.
• Japanese car manufacturers like Nissan, Honda, and Toyota located car factories in the UK to avoid EU trade barriers.
• Cars made in the UK, can be sold in France, Germany, Italy, and other EU countries without tariffs.

Government Incentives

• Governments attract foreign direct investment (FDI) through incentives to boost income and employment.
• Governments offer financial incentives such as tax breaks, lower company tax rates, interest-free loans, cheap land, and better rates on business premises.
• Bangladesh offers attractive fiscal, financial, and other incentives to foreign entrepreneurs in South Asia.
• These may include tax exemptions for new businesses for 5-7 years (15 years for electric power).
• All import duties are removed for export-oriented business ventures.
• Double taxation can be avoided due to Bangladesh's bilateral investment agreements.
• Income tax exemptions of up to three years for expatriate employees in specified industries may be available.
• Capital, profits, and dividends can be returned to the investor's country without penalty.
• Business investors can withdraw their investment with authorization from Bangladesh Bank.
• Foreign investors can set up operations independently or in joint ventures with Bangladeshi partners.
• Multiple entry visas, tax exemptions on royalties or technical know-how fees, and tax exemptions on foreign loans may be offered.
• Permanent residency may be available for investments of $75,000 or more.
• Governments may reduce bureaucracy, liberalize trading laws, invest in education and training, and improve infrastructure to attract businesses.
• Tax regimes are important to businesses when choosing a location with 63% of CEOs surveyed stating tax policy was an important consideration.
• The lowest corporation tax rates are found in Ireland (12.5%), Hungary (9%), and Uzbekistan (7.5%).
• The world average is 22.5%.
• Financial incentives may also be offered in developing countries, for example governments in Kenya, Tanzania, Uganda and Rwanda offer tax holidays and reductions in standard taxes, such as VAT and customs duties.

Ease of Business

• The commercial environment, or 'ease of doing business', is a crucial consideration when choosing a location.
• It is easier to do business in some countries.
• A location should be chosen where it is easy to do business as trading restrictions and additional costs can be frustrating for businesses.
• The ease of doing business depends on how easily businesses can be started and closed, the efficiency with which contracts are enforced, the amount of bureaucracy, the availability of trade credit, the efficiency of tax collection and the ease of resolving insolvency.
• The top 10 easiest places in the world to do business were ranked in 2017. No ranking given
• Developing countries often have poor infrastructure and political instability.
• Rankings act as a guide for businesses looking for overseas locations.
• Rankings incentivize governments to introduce measures to improve ranking.

Political Stability

• Some countries are politically unstable, which can be dangerous for business.
• The risk of financial loss may be high due to political problems.
• Places like Syria, Somalia, and parts of Latin America should be avoided.
• There is a risk of kidnapping where business people are common targets for ransom.
• Latin America is one of the most dangerous places for kidnapping, with estimates between 5000 and 10000 per year.
• In some countries, political systems are corrupt, bribery is common, and businesses avoid these countries.
• Businesses avoid countries due to human rights records to avoid consumer boycotts and shareholder disapproval.

Natural Resources

• Some business activities, like mining, need large quantities of natural resources.
• Mines can only be sunk in locations with mineral deposits.
• Until commodity prices fell, Africa attracted mining companies.
• Rio Tinto acquired a coal-mining project in Mozambique for $2.7 billion in 2011.
• Businesses using natural resources in production may set up near sources.
• Steel producers locate plants near iron ore or coal mines.
• ArcelorMittal, the Luxembourg-based multinational steel producer, operates in more than 60 countries and is the largest steel company operating in South Africa.
• Steel producers want to be close to mines to reduce transportation costs.