Changing role of the public sector in the promotion of foreign direct investment

Raj Kumar
2004 Asia-Pacific Development Journal  
Foreign direct investment (FDI) is one of the key drivers of globalization. The challenge for developing countries is to tap FDI in a way that promotes their long-term development objectives. Governments of developing countries need to go beyond offering a "passive open door" regime for FDI to one that positively enhances required human resource skills for the absorption of FDI. In that regard, Governments, through the public sector, need to create a conducive policy environment that enables
more » ... ent that enables FDI to contribute towards enhancing the international competitiveness of the host country on the basis of a dynamic development of comparative advantage. Foreign direct investment (FDI) is one of the key drivers of globalization, along with trade and portfolio flows such as debt and equity, all of which, together with the information, communication and technology (ICT) revolution, are major forces in increasing the process of global business activity. FDI induces trade and deepens interdependence among nations. Indeed it is difficult to find any policy regime, be it in taxation, investment protection or foreign exchange transfer in both developed and developing countries that does not have an active stance on promoting foreign direct investment. FDI involves the effective management control of a resident entity in the host country by an enterprise resident in another country, and hence has corporate governance implications. 1 It has also been viewed in some circumstances as infringing on a country's sovereignty through foreign control over its resources, particularly where natural resources such as minerals, oil, forests and water are involved, and a threat to domestic investment promotion. Others have questioned the benefits of
doi:10.18356/e875a53a-en fatcat:5xdfk5loc5gwfndmvdhmdcaz2u