Edited by Kern Alexander and Rahul Dhumale
Chapter 10: Globalisation and the Regulation of FDI: Recent Proposals
1 Ajit Singh Editors’ abstract: Professor Ajit Singh analyses some of the main risks posed by the foreign direct investment (FDI) of multi-national enterprises for developing country economic development. His critical analysis of FDI forms the basis of his sceptical view of the proposals by the European Union and Japan in the mid 2000s to create a liberalised multilateral investment regime within the World Trade Organisation to govern FDI between WTO members. Although this proposal later failed to achieve consensus amongst WTO member states during the collapsed Doha Trade Round negotiations of 2006–2008, Professor Singh argues that weaknesses remain in the existing international regime that consists of thousands of bilateral investment treaties, most of which involving developed and developing countries limit the discretion of developing countries to regulate adequately their economies and thereby protect themselves from market failure. Although the EU and Japan’s proposal failed, another version of it could be resurrected in future global trade round negotiations and therefore developing countries should be vigilant. INTRODUCTION This chapter selectively reviews the role of foreign direct investment (FDI) in the present state of the world economy – how it affects economic development and welfare in rich and poor countries. Multinational companies (MNCs) are normally the vehicles for FDI, and are central to the current globalisation processes. The key analytical and policy question examined is whether these companies and their overseas investment need to be regulated at the national and/or at the international level, in order to address market failures, as well...
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