Foreign Direct Investment and Development: The New Policy by Theodore Moran

By Theodore Moran

International direct funding (FDI) has grown dramatically and is now the most important and so much sturdy resource of non-public capital for constructing international locations and economies in transition, accounting for almost 50 percentage of all these flows. in the meantime, the becoming function of FDI in host nations has been observed by means of a transformation of perspective, from severe wariness towards multinational enterprises to occasionally uncritical enthusiasm approximately their function within the improvement procedure. What are the main worthy merits and possibilities that international agencies need to provide? What dangers and risks do they pose? past bettering the micro and macroeconomic "fundamentals" of their personal nations and development an investment-friendly atmosphere, do specialists in host international locations want a proactive (rather than passive) coverage towards FDI?

In some of the most finished stories on FDI in twenty years, Theodore Moran synthesizes proof drawn from a wealth of case literature to evaluate guidelines towards FDI in constructing nations and economies in transition. His concentration is on funding merchandising, household content material mandates, export-performance necessities, joint-venture necessities, and technology-licensing mandates. The learn demonstrates that there's certainly a wide, full of life, and very important function for host specialists to play in designing guidelines towards FDI yet that the wanted activities vary considerably from traditional knowledge at the subject. Dr. Moran deals a pathbreaking time table for host governments, geared toward maximizing the advantages they could receive from FDI whereas minimizing the hazards, and indicates how they may most sensible pursue this time table.

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Sample text

But firms also have an interest in ferreting out information that may provide them with an advantage over rivals. And, as part of search theory, investors, like employers, have an interest in developing screening devices to sort among potential prospects. If the investment-promotion task could be limited to efforts at advertising and product differentiation and there were no larger issues of market failure or investment-diverting interventions by others to deal with, then potential hosts could accomplish these goals with only modest expenditure of resources and minimal potential for distortion.

What is the likelihood of being able to carry out appropriate interventions successfully? This chapter raises theoretical considerations about host-country intervention that will help to illuminate the discussion in the subsequent three chapters on public-sector efforts to attract FDI, on the imposition of domestic-content requirements, and on the use of export-performance requirements. Even so popular and seemingly benign an activity as investment promotion carries possible dangers for host countries.

At the production stage, there are often barriers to entry, deriving from scale, capital intensity, technology of exploration and exploitation, and intangible assets associated with managing large complex engineering operations on time and on budget. At the same time, factors of scale, capital intensity, and processing technology subject players with high fixed costs at positions upstream and downstream from each other with sudden shifts in monopoly or monopsony power. com nisms of formal or informal vertical integration, ranging from sole ownership, to joint ownership of various stages, to long-term contracts for large volumes at slowly moving arm’s-length price averages.

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