ABSTRACT
This chapter draws a distinction between constraints in the developed countries and newly industrialised economies and in the developing and transition economies. It analyses the economic arguments and the national security arguments for restrictions in the first group of countries. The chapter also analyses the economic development concerns of developing and transition economies around foreign investment. It suggests that national security concerns were the stated reason for introducing a de facto screening mechanism in the US in the form of the Exon–Florio amendment. M. Graham and P. Krugman also examine the justification for foreign investment restrictions on national security grounds. Political constraints on foreign investment liberalisation arise in response to opposition from a number of key sources. P. Limpaphayom and P. Fong's 1991 study of foreign investment in Malaysia, Thailand, Taiwan and Singapore provides some useful observations concerning the impact of foreign investment in developing local industry.
