Putting it to Work in Developing Countries - Nathan Associates

7. PUTTING FDI TO WORK:
STRATEGIC USAID
ASSISTANCE
For developing country governments and businesses,
the development case for FDI is clear:
attracting FDI means sharing in the benefits of
globalization in the 21st century. The requirement
for harnessing FDI for development is also
clear: aggressive modernization and liberalization
of host-country economies. In essence, efforts to
maximize the impacts of FDI pull together the
whole range of issues at the heart of development
thinking today—good macroeconomic
management, microeconomic reform, private
sector enterprise, technology transfer, and
human capital development. For this reason,
and because the issues involved call for highly
specialized technical expertise and a best-practice
perspective, maximizing the benefits of FDI is a
highly productive and strategic focus for USAID
assistance to developing countries.
FDI FACTS AND TRENDS
USAID programs to help developing countries
maximize FDI benefits need to be fact-based
and forward-looking. The preceding chapters
provide references that highlight and define 12
facts and trends that these strategies must
address:
1.
2.
3.
FDI provides real and compelling development
benefits, but they are not automatic.
These benefits begin with FDI’s boost to
capital accumulation and direct employment,
but the real payoff lies in technology
transfer and human capital development,
both of which boost productivity.
From the perspective of the multinational
foreign investor, FDI projects are commercial
transactions, motivated by very specific
business considerations. Developing
country governments need to distinguish
among these motivations and to assess
whether and how different kinds of FDI
would fit into their economies.
A small group of large countries, led by
China, dominates the receipt of FDI
inflows in the developing world, as
measured in absolute terms. More than
three-quarters of all developing country
inflows go to 20 or so countries; the rest is
divided among more than 125 countries.
But when measured on a per capita basis,
even a little FDI can go a long way in a
small economy.
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