Foreign direct investment (FDI) has grown dramatically and is now the
largest and most stable source of private capital for developing
countries and economies in transition, accounting for nearly 50 percent
of all those flows. Meanwhile, the growing role of FDI in host countries
has been accompanied by a change of attitude, from critical wariness
toward multinational corporations to sometimes uncritical enthusiasm
about their role in the development process. 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? In one
of the most comprehensive studies on FDI in two decades, Theodore Moran
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, export-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. Dr. Moran offers a new and controversial agenda for host
governments, aimed at maximizing the benefits they can obtain from FDI
while minimizing the dangers, and suggests how they might best pursue
this agenda.
