The last decade has witnessed a dramatic change in attitude towards foreign direct investment (FDI) and significantly increased competition between governments to attract FDI as a result.
Globalization, and especially the removal of national barriers to capital flows, has lead to a tremendous surge in foreign direct investment which reached a record high of almost US$1.3 trillion in 2000 — representing a growth rate of 18 percent, which is higher than those of any other global economic indicators including world production, trade or capital formation.
This development has had a significant impact not only on economic processes but also on government policies aimed at attracting FDI. While still only a few Western countries would acknowledge investment promotion as an economic policy goal
, all of them have set up specific policies and institutions that are aimed at attracting and regulating investment flows.
The latter is easy to understand given that the overall distribution of FDI remains highly skewed — only 30 host countries in total account for about 95 percent of all FDI inflows, and less than 30 home countries account for 99 percent of all outward investment flows in 2002
— and competition is fierce.