Investment environment

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Investment environment
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Investment environment is combination of all external conditions that may influence and limit investment activities and the profits derived from them considered from the investor's point of view. It can be also defined as the all external circumstances that may affect the flow of capital and increase in its value looking from investment capital side.

These conditions are such elements as political factors, financial policy, basic infrastructure, socio-economic conditions, natural resources and the physical environment related to investments and which are within some spatial-temporal framework. A spatial scale needs to be specified if we want to explore the investment environment. It can be considered in different scales - depending on the scale chosen other factors of the environment are examined. For example, when it comes to the national scale instance, political, economic, financial, and law factors will be most crucial. The final result of the investment project can be affected by all main and secondary elements. Main and second-rate elements are different depending on the investment plan or purpose (H. Lin, Q. Wan, Li X., J. Chen, Y. Kong 1997, p.403-404). "Traditional investment environment evaluation focuses on macro factors, factors such as government stability, restrictions, and red tape"(H. Lin, Q. Wan, Li X., J. Chen, Y. Kong 1997, p.403).

An example of a thriving, international investment environment is an environment in Mainland China. Great influence on that was made generally by the political situation on the globe as well as the political situation in China (government put pressure on developing this environment and opening up for other nationalities). "Furthermore, Mainland China's participation in the WTO will facilitate further system reforms and structural adjustment in the country. This, too, will encourage foreign investors to put their capital in Mainland China" (H. Chen-min, Z. Wei-guo, L. Leslie 2007, p. 178)

Aspects of investment environment

Three aspects of investment environment deserve to be studied in investment environment research

  • Investment environment rating- this assessment is based on analyzing the impact of various elements on the investment environment. From the investors' point of view, this type of assessment is important because it allows you to create a clear investment area that makes investment decisions more solid. Any other way, local decision-makers can use this type of assessment to focus on the factors of their environment to develop them and attract investments.
  • Investment environment prediction
  • Investment environment betterment (H. Lin, Q. Wan, Li X., J. Chen, Y. Kong 1997, p.403).


Author: Gabriela Jopek