Offshoring – The Way Forward

If starting a business operation in your own country is too expensive, the best option would be to take it to some other part of the world which is more conducive and welcoming in terms of the facilities, infrastructure offered and the labour present.

Since the late 80s, freezone companies in Dubai have become rapidly popular in all parts of the world alike with more investors moving from developed countries to ‘tax havens’ to set up their businesses. Particularly countries in Asia benefitted from this significantly where the problem of unemployment in a lot of countries including Maldives, Bangladesh and even India was significantly reduced due to this.

With more youth being employed, the governments of these countries saw that one of their most crucial problems being solved and in order to retain the freezone companies that generate thousands of jobs, governments introduced flexible tax and other related law and regulations so that while the existing businesses with remain in the country, more investors would come in and invest more as a result.

This strategy however worked for most countries until in some places unforeseen events such as ethnic tensions made conditions rocky for the investors as the governments failed to assure security for the facilities and the investments that they’ve made. Due to this, some investors pulled out from countries and had to face severe losses in the process.

On the other hand, due to the economic crises in the US and Europe, most investors had to terminate their businesses because their clientele’s purchasing power was affected by the unfavourable conditions. Many lost their jobs and the governments were burdened with the task of assuring financial security to those who lost their jobs. However, as the west has recovered from its crises, more and more investors are seen taking a keen interest on countries like Sri Lanka where the government actively encourages FDI and is also making substantial investments in this regard such as building ports and highways and restoring the road systems, facilitating convenient access to all parts of the country.

With the workforce being highly efficient and literate, the island stands out as a favourable destination for offshoring. Some benefits of offshoring however includes convenience in the setting up of a given business as all the registration and other related activities will be carried out in compliance with the rules and regulations and tax policies of the country where the business will operate from. Concessions and other benefits that an investor gets when operating from a ‘tax haven’ will help to reap better profits sooner.