Companies must weigh a variety of factors when deciding where to expand internationally. From the presence of competitors in foreign markets to whether a country’s workforce can meet future hiring needs, there are many consideration points. The COVID-19 pandemic sheds light on another critical factor: how well international governments help businesses rise above economic adversity. By understanding how different governments allocate funds and services to firms in need, companies can better determine which markets are most conducive to their growth.
Read on to discover how the governments of four top international economies help companies overcome the pandemic’s challenges.
Germany Protects Companies and Workers Through Kurzarbeit
Germany has maintained one of the world’s most resilient workforces during the pandemic, thanks in part to its Kurzarbeit program. The job protection program consists of employers reducing working hours rather than laying employees off. To compensate for the decrease in hours, the government provides workers with additional income, helping companies save money while workers keep their jobs.
In addition to protecting workers through Kurzarbeit, Germany allocates nearly 30% of its 2020 GDP toward loans and equity injections into its economy. At the same time, the country committed around 12% of its GDP to additional pandemic-relief spending, placing it on par with other world leaders such as Japan, the United States, and Canada.
For the first half of 2021, Germany set aside 22 billion euros ($26 billion) in pandemic relief aid for companies and self-employed workers. The 2021 relief allocation follows Germany’s 14-billion euro ($16.9 billion) package during Q4 of 2020. During that stimulus round, the government provided companies with 200,000 euros per month to cover recurring costs like rent, while individual entrepreneurs were entitled to 5,000 euros monthly. Aside from providing direct relief to businesses, Germany introduced a temporary value-added tax cut and increased state-spending on healthcare, eco-friendly initiatives, and digital infrastructure.
France Centers Pandemic Relief Bills Around Green Investments
In September of 2020, France announced a two-year stimulus plan worth 100 billion euros ($118 billion)—with a significant focus on green energy. The package is aimed at France’s industrial, construction, and transportation industries, each of which has faced severe economic challenges due to pandemic-induced lockdowns. The package incentivizes companies in these industries to move away from fossil fuels.
Beyond supporting green initiatives, the stimulus package is designed to create more than 160,000 jobs in 2021. The spending plan earmarks 36 billion euros to fund “solidarity and skills” training programs. By helping younger workers develop in-demand job skills, France hopes to boost its future economic competitiveness while increasing overall employment levels.
France spends approximately 26% of its GDP on pandemic aid, which is on par with other leading world economies. France also provided additional protection for its businesses by offering government-guaranteed bank loans. These loans give companies the liquidity necessary to pay their employees, cover routine costs of doing business, and withstand revenue losses during the pandemic.
Dubai Consistently Injects Capital into Economy
In January, Dubai announced the fifth installment of its ongoing stimulus initiative. This latest phase of stimulus is worth Dh 315 million (about $85.5 million), bringing Dubai’s total inward investment to Dh 7.1 billion ($1.9 billion).
Dubai’s latest stimulus extends benefits from earlier packages until June. One key advantage for new and existing firms is the reduction of market fees or costs associated with opening or maintaining businesses in Dubai. In April of 2020, Dubai’s government slashed the market fee for instant business licenses and renewals by over 90% from Dh 3,000 to Dh 250. The country’s latest stimulus package extended the market fee reduction, making it available to all businesses that have not yet claimed it. In an additional benefits extension, companies can maintain their business licenses without renewing the leases on their physical properties.
Dubai’s most recent stimulus package is part of an overall increase in government spending in 2021. Dubai is allocating Dh 57.1 billion ($15.5 billion) toward its overall budget for 2021, up from Dh 56.2 billion in 2020. The country is increasing spending to combat “the exceptional economic conditions of the fiscal year 2020 and the repercussions of the Covid-19 pandemic on the global economy.”
Japan Leads the World in Pandemic Relief Proportional to GDP
As of Q4 2020, Japan led all world economies by committing 42.2% of its GDP toward pandemic relief. For perspective, Slovenia ranks second globally by allocating 24.5% of its GDP toward COVID-19 financial aid.
Japan’s most recent stimulus package, passed in December 2020, allocates $708 billion for pandemic aid. Like France, Japan is dedicating a significant portion of the assistance to green initiatives. The December bill sets aside over half of its funds toward decreasing carbon emissions and increasing digital technology use. Japan hopes the bill will further its efforts to achieve carbon neutrality by 2050.
Japan’s generous pandemic relief spending pays dividends for the country’s small businesses. Midway through Q4 2020, small companies in Japan already received more than $250 billion in government loans. To facilitate the process for small companies, Japan’s government simplifies the application process, with companies only needing to show they have suffered financial losses during the pandemic. The government also incentivizes banks to offer loans by increasing interest earned on deposits in Japan’s central bank. As a result, banks loaned $350 billion more in 2020 than they did in 2019.
Maximize Expansion Opportunities in Business-Friendly Economies
Companies pursuing global expansion must understand how international governments promote or inhibit their ability to achieve growth goals. By evaluating pandemic relief responses, companies gain insight into how foreign governments provide resources to support firms. Even during economic prosperity, companies encounter expansion challenges in countries with complicated legislation or heavily bureaucratic processes. Turning to an international expansion expert helps companies understand which markets are right for their needs.
Velocity Global has experience helping companies of every size plan expansion strategies into over 185 countries worldwide. Reach out today to find out how we can help you chart an international growth course that’s right for your business—and streamline every step of your expansion process.