Competitiveness Strategy in Developing Countries: A Manual for Policy Analysis

By Ganeshan Wignaraja | Go to book overview

6

Government policies towards foreign direct investment

Dirk Willem te Velde1


Introduction

Governments in developing countries are increasingly looking for best-practice policies towards Foreign Direct Investment (FDI). 2 Renewed confidence in the positive benefits of FDI has led many countries that were restricting FDI in the 1960s-1980s to be more open towards FDI in the 1990s (Safarian, 1999) and beyond. Governments are liberalising FDI regimes as they associate FDI with positive effects for economic development in their countries (e.g. Borensztein et al., 1998; Lall, 2000a). Of course, in actual practice objectives to attract FDI differ by country (e.g. technology, market access, growth and poverty alleviation) and the effects of FDI may not always be desired (neglect of local capabilities, environmental damages, inequality between individuals or regions).

Increased liberalisation and technological advances have led to a rapid growth in FDI flows over the last three decades. FDI increased as a ratio of domestic investment and GDP in many countries (UNCTAD, 2000). However, while some countries attracted large FDI flows, others were less successful, even though they had liberalised FDI regimes. Intensified competition for FDI (Oman, 2000) has led many organisations to look for benchmarks of policies towards attracting FDI (see e.g. IPAP (2000) in the Asia-Europe meetings; CBI (1999) in the case of African countries). Countries are forced to be more open towards FDI in the emerging environment (including WTO rules and the importance of technology transfer) where it is difficult to build up an industrial capacity behind closed doors.

Whilst for some countries there is concern about the quantity of flows, there is a shift in other countries towards the quality of FDI. The term quality usually refers to high value-added FDI and/or to FDI with positive linkages and spillovers effects for the domestic economy. Countries that have had successful development based on FDI need to continue to upgrade FDI, either by encouraging existing multinational affiliates to develop into strategic independents, or by targeting higher value-added FDI. With WTO rules limiting domestic policy options we will look at what policies a government can still use.

Relying on high quality FDI does not guarantee (and sometimes prevents) the improvement of local capabilities. We review whether FDI has positive spillovers for the local economy in terms of growth and productivity. Theoretical developments

-166-

Notes for this page

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items
Notes
Cite this page

Cited page

Style
Citations are available only to our active members.
Upgrade your membership to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Note: primary sources have slightly different requirements for citation. Please see these guidelines for more information.

Cited page

Bookmark this page
Competitiveness Strategy in Developing Countries: A Manual for Policy Analysis
Table of contents

Table of contents

Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this book

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen
Items saved in your active project from this book
  • Bookmarks
  • Highlights & Notes
  • Citations
/ 307

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Upgrade your membership to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Search by... Author
    Show... All Results Primary Sources Peer-reviewed

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.