Foreign investment in developing countries

Following the recent revival of interest in the role of foreign investment in development, this paper summarises briefly the effects of such investment in developing countries. The paper discusses some of the recent changes in policies and attitudes. It also examines the characteristics of investment flows in recent years, their quantities and direction, and what appears to explain them, in order to be able to judge how practical are the proposals that are being made to increase their role in the future. Whether an increase in the role of such investment is desirable must depend in part on judgements by policymakers in developing countries about the proper role of the private and public sectors and of foreign participation in any economy.