Op-ed piece by Rodrigo Polanco for Trade for Development News by EIF
Foreign direct investment (FDI) constitutes a dominant part of private capital flows to least developed countries (LDCs). According to the UN Committee for Development Policy (CDP), FDI can lead to tangible and intangible benefits, playing a catalytic role in building and strengthening productive capacity and export growth, including developmental objectives such as technology and skills transfer, employment generation, higher wages and poverty eradication. However, the total share of global FDI flows to LDCs remains very low and is often directed at resource extraction.
Whereas many studies have focused on the measures undertaken by host countries to attract FDI, little research has been conducted on what development partners can do to promote and facilitate more sustainable FDI to LDCs – either directly or indirectly. Here we look at these home country measures and how they can influence the flow of productive foreign investment to poor host economies.