Foreign Direct Investment to Developing Countries

One of the premises of the case for a Multilateral Agreement on Investment (MAI) is that it would promote increased flows of foreign direct investment (FDI) to developing countries. As the Fitzgerald Report puts it, ‘for developing countries, membership (of the MAI) would bolster the confidence of not only foreign but also domestic investors by ensuring that the policy regime is unlikely to shift in the future due to cost of withdrawal of a multilateral agreement of this type’ (Fitzgerald, 1998). This may be so. But does FDI necessarily promote development objectives everywhere and anywhere? Is FDI a tested and tried instrument of development? Is the ability of FDI to promote development constrained or enhanced by the rules and regulations on its entry and operations widely used by developing countries? These and other issues have been the focus of much debate and discussion. Indeed, there may be no other area of economic inquiry where so much has been written and yet we know so little.