Foreign Direct Investment and Development: The New Policy Agenda for Developing Countries and Economies in Transition

Foreign direct investment (FDI) is the largest and most stable source of private capital for developing countries and economies in transition. What are the most valuable benefits and opportunities that foreign firms have to offer? What risks and dangers do they pose? Beyond improving the micro and macroeconomic "fundamentals" in their own countries and building an investment-friendly environment, do authorities in host countries need a proactive (rather than passive) policy toward foreign investment? The author of this study synthesizes evidence drawn from a wealth of case literature to assess policies toward FDI in these countries. His focus is on investment promotion, domestic content mandates, expert-performance requirements, joint-venture requirements, and technology-licensing mandates. The study demonstrates that there is indeed a large energetic and vital role for host authorities to play in designing policies toward FDI but that the needed actions differ substantially from conventional beliefs on the topic. Moran offers a controversial agenda for host governments, aimed at maximizing the benfits they can obtain from FDI while minimizing the dangers, and suggests how they might best pursue this agenda.