How economics in developing country are affected by foreign and investors and investment project?
Answers
Reducing risk in developing countries is key to spurring investment and growth.
A new report and investor survey published today by the World Bank Group concludes that, on balance, foreign direct investment (FDI) benefits developing countries, bringing in technical know-how, enhancing work force skills, increasing productivity, generating business for local firms, and creating better-paying jobs.
The question examined in the report is when and under what circumstances are these benefits of FDI most likely to occur.
The Global Investment Competitiveness Report 2017/2018, launched today at an international investment forum, combines a survey of 750 multinational investors and corporate executives with detailed analysis and recommendations concerning FDI in developing countries.
Co-authored by the World Bank Group’s International Finance Corporation (IFC) and the Trade & Competitiveness Global Practice (T&C), the report considers developing countries as both sources and recipients of FDI. The analysis examines the ability of developing countries not only to attract private investment but to retain and leverage it for inclusive and sustainable growth.
"A country’s investment competitiveness goes beyond attracting FDI. It is determined by the country’s ability to bring in, retain, and leverage private investment for inclusive and sustainable economic growth. "
Anabel Gonzalez, Trade & Competitiveness Senior Director, and Ted H. Chu, IFC Chief Economist in the Foreword to the Global Investment Competitiveness Report 2017/2018
The investor survey shows that political stability and security along with a stable legal and regulatory environment are the leading country characteristics considered by executives in multinational corporations before they commit capital to a new venture. These considerations far outweigh such issues as low tax rates and labor costs.
Investment incentives may help attract FDI but are generally effective only when investors are wavering between similar locations as a new base for their exports. When investment is motivated by a desire to access a domestic market or extract natural resources, incentives are generally ineffective.
Of far greater importance, the report finds, is the level of legal protections against political and regulatory risks, such as expropriation of property, currency transfer and convertibility restrictions, and lack of transparency in dealing with public agencies. Reducing these risks at the country level is a foundation without which reducing project-level risks will not lead to increased investment and growth in developing countries.