There is a prevailing belief that authorities should invest in local corporations more than foreign firms. While acknowledging the reasons behind this thinking, I believe that both businesses are essential and governments should prioritize which ones are appropriate based on the country’s resources.
On the one hand, it is understandable why some countries try to attract the foreign direct investments because they bring resources that their countries do not have, especially for developing countries. The key rationale lies in the ability of multinational companies such as fostering competition, providing local products to access international markets, and bringing advanced technologies. For example, Vietnam is encouraging Nvidia, an enormous firm in chip production, with a huge fund to construct a factory about research and development in their country. As a result, multinational corporations can boost the development of local companies by providing important sources, which shortens the development gap. Therefore, governments from developing countries should prioritize these companies to their economic abilities.
On the other hand, local companies can lead to sustainable economic growth within a country, particularly in developed countries when the local firms have developed to a certain level. When the local businesses thrive, they create jobs and stimulate the economy, thereby benefiting the entire nation. A domestic company will firstly serve the local customers and recruit employees, who belong to that country, this will raise the economy through the money rotation while introducing opportunities for people to access the labour market. At this stage, a local company would be more essential as it has a strong foundation in developed countries, which can create new products and services by itself rather than rely on overboard objects.
In conclusion, the government’s role in encouraging local businesses versus foreign ones is a balancing act. While the developed country should lean on local companies, those developing should prioritize the foreign firms, this will be based on their background. Therefore, both have their merits and a flexible approach involving supporting both would be appropriate.