The creation of gross capital equals the cumulative expenditure of the capital of a country’s fixed assets. High investments represent the promising prospects of financial growth, which puts the country at a competitive edge. In 2008, the formation of growth capital in Ireland increased considerably to 63.4%, and Japan reached 4.1%. The discrepancy is clarified by different factors. Foreign companies, for example, saw Ireland as an investment area eligible for Japan. Millions of investors are rich in unexploded raw materials and natural resources. Moreover, unlike Japan that already has local factories and warehouses, Ireland does not, leaving room for potential investors (Fink, 2014). The investors, therefore, brought an intensified competition to the few local companies in the region, which in turn propelled unprecedented economic growth.
According to Flynn (2014), Japan_x0092_s burdensome regulations are also to blame. The nation has had a history of establishing harsh laws that bar companies from building investment in the country. A significant example is the Large Scale Retail Store law meant to protect small retailers but made it difficult for foreign investors to open large stores. On the contrary, Ireland has loosened its rules to encourage foreign investment from economically powerful nations such as the U.S. Fink (2014) elaborates the introduction of low corporate taxes in the country with intent to favor both large and small business activities as a demonstration of this scenario.
Unlike Ireland, Japan has often reasoned around speculative cultural factors. Most Japanese factories resist foreign enterprise acquisition with the fear that new owners will break ties with suppliers and cut jobs from locals (Flynn, 2014). Moreover, the foreign investors cannot find suitable managers for newly established firms as most qualified administrators tend to remain in a single company for an extended period.
Arguably, the increased gross fixed capital in Ireland is justifiable to that of Japan. Compared to the dynamic economic growth of Ireland, Japan is less attractive to investors due to slow economic growth, limited resources, and cultural factors. The Japan_x0092_s government should, however, encourage more foreign investments to save the future economy.
Fink, M. (2014, May 13). The globalization of taxes. Retrieved from globaledge.msu.edu/blog/post/5715/the-globalization-of-taxes
Flynn, M. (2014, April 14). Sales tax increases in Japan. Retrieved from globaledge.msu.edu/blog/post/4694/sales-tax-increases-in-japan
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