A new 33-country comparison study released today revealed Australia sits below the global average in attracting Foreign Direct Investment (FDI) as a percentage of GDP.
The study by UHY, the international accounting and consultancy network, looked at FDI as a percentage of GDP in the period since the credit crunch from 2008 to 2012, highlighting Australia sits in 10th place with a rate of 15.2%. This is compared to a global average of 17.1% and well below the EU average of 20%.
One of Australia’s regional trade competitors, Singapore recorded the second highest FDI with an extremely high 74% FDI as a percentage of GDP. Singapore’s startup industry has had significant government support with tax breaks and fund matching on investments.
UHY Haines Norton Australia and New Zealand Chairman, David Tomasi said the study underlines the need for Australian policy makers to address a range of areas if it wants to improve its international FDI attractiveness.
“Favourable tax systems in countries like Singapore and EU countries like Ireland, Belgium, Estonia and Croatia have helped them to outperform the rest of the world in attracting Foreign Direct Investment in the five years since the global credit crunch,” Mr Tomasi said.
“While our R&D offset record is pretty good, UHY’s recent research highlighted that Australia is well down the international list when it comes to favourable corporate tax rates and low labour costs which unquestionably has an effect on attracting FDI.”
Tomasi says tax holidays for startups was one way that the government could make FDI more attractive.
“While this has consequences in the short term in the long term there’ll be gain,” he says.