How to Promote Development-friendly FDI: – An Agenda for Policymakers in Developing Countries –. Peter Nunnenkamp Kiel Institute for World Economics. Why Attractiveness to FDI Is Not Enough. Two conditions have to be met: attractiveness to FDI growth-enhancing local conditions
Kiel Institute for World Economics
Two conditions have to be met:
It is much more difficult to benefit from FDI than to attract FDI.
More emphasis to be placed on the quality of FDI, rather than its quantity?
For two reasons, this is easier said than done:
Incentives may make a difference and may be justified theoretically.
But the elusive nature of spillovers hardly justifies the extensive use of incentives.
Spillovers depend on local absorptive capacity.
FDI incentives are no substitute for local strengths.
Competition for high-tech FDI:
UNCTAD list of policy options:
Policymakers need to know:
Major requirements for benefiting from FDI include:
The crux is that creating a local environment in which FDI delivers social returns amounts to a daunting task exactly where development needs are most pressing.
In any case needed: a detailed account of competitive strengths and weaknesses.