C8. Operational Support

Operational support is provided by the home country government after the establishment of an investment, when the activities associated with an investment are ongoing in the host country. This focus on post-establishment support distinguishes operational support from early support services, which are services offered primarily before an investment is made. 

Governments can offer support in dealing with policies overseas by assisting investing MNEs in handling policy challenges they encounter abroad. Overseas diplomatic representations – embassies and consulates – often take on a role in this area. There are at least three ways through which such support can be offered:

1. The home government can support investors by facilitating their establishment in the host country, which  might include negotiating market access and finding ways for investors to overcome entry barriers and other bureaucratic hurdles. It might also involve troubleshooting issues and problems with an investment (Stephenson and Perea 2018).
2. Governments can provide political and diplomatic backing to MNEs dealing with host country authorities regarding investment-related policies and regulations.
3. The home country government can engage in policy coordination with host governments and authorities. One objective of such coordination could be to ascertain whether the HCMs of the home country align with the host country’s policies and regulations governing inward investments. Such policy coordination could not only occur bilaterally, but also among members of regional groupings to achieve better regional economic integration (UNESCAP 2020). 

Governments can mobilise domestic support for OFDI by involving various associated stakeholders in the home country and especially companies and banks:

1. The government can work on encouraging inter-firm collaboration on OFDI. For example, firms could be encouraged to collaborate for the purpose of investing abroad, especially when they lack the capabilities to go it alone. More generally, the private sector could be encouraged to support OFDI projects.
2. The government could encourage banks to finance OFDI and ask financial institutions to consider supporting OFDI projects with appropriate funding.

The home country government could encourage the provision of auxiliary services overseas:

1. It can get involved in mobilising OFDI-associated service providers to establish their own presence in the host country in order to directly support MNEs and their subsidiaries on the ground. The service providers relevant to OFDI are banks and other financial institutions, law firms, consultancy firms, etc.
2. The government or the private sector can establish centres or parks in host countries to make it easier for home country MNEs to establish overseas subsidiaries. As such centres and industrial parks have a stronger connection with the home country, they provide a more comfortable environment for investors to launch their overseas operations and establish foreign subsidiaries (Stephenson and Perea 2018).

Governments can focus their operational support on areas and activities where home-country effects from OFDI are prevalent or are expected to occur (UNESCAP 2020).

Key insights

• Governments can offer various kinds of operational support in the post-establishment phase of an investment to facilitate the success of OFDI projects and the generation of home-country effects.
• Beyond directly supporting investors with their overseas projects, providing operational support involves engagement with foreign governments and mobilisation of other domestic companies and stakeholders.