Nations, Industries and Households
Edited by Robert M. Solow and Jean-Philippe Touffut
Chapter 2: How Global is Foreign Direct Investment and What Can Policymakers Do About It? Stylized Facts, Knowledge Gaps, and Selected Policy Instruments
1 Peter Nunnenkamp INTRODUCTION Foreign direct investment (FDI) is a major driving force of globalization. Worldwide FDI stocks (in current prices) soared from US$700 billion in 1980 to almost US$15 trillion in 2008.2 In contrast to the vagaries of international financial markets, booming FDI is widely believed to offer access to capital, technology and know-how for an increasing number of host countries, thereby providing them with better chances to integrate themselves into the global division of labour. Even sharp critics of financial globalization and capital account liberalization advocate opening up to FDI. According to Joseph Stiglitz (2000, p. 1076): the argument for foreign direct investment . . . is compelling. Such investment brings with it not only resources, but technology, access to markets, and (hopefully) valuable training, an improvement in human capital. Foreign direct investment is also not as volatile – and therefore as disruptive – as the shortterm flows. Institutions such as the United Nations, which not very long ago passed extremely critical judgements on multinational enterprises (MNEs), now expect these enterprises to promote economic development in emerging markets, and even help the fight against absolute poverty in the neediest host countries.3 The UN summit on Financing for Development in Monterrey in 2002 concluded that creating the necessary conditions to facilitate FDI inflows is a central challenge for developing countries, particularly the poorest among them. 32 M2417 - SOLOW PRINT.indd 32 21/10/10 16:35:47 How global is FDI and what can policymakers do about it? Number (net) 500 440 400 33...
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