ABSTRACT
Foreign direct investment (FDI) is playing a growing role in economic development. Unlike other forms of capital inflows, FDI almost always brings additional resources—technology, management know-how, and access to export markets—that are desperately needed in developing countries. Investors are exacting, however, when it comes to deciding which countries are the most desirable sites for investment, and the lion s share of FDI has been going to a handful of countries, mostly in East Asia and Latin America. More and more developing countries have reduced barriers to FDI and improved their business climates. Many developing countries have also embarked on reforms, addressing the same issues—fiscal and monetary imbalances, price distortions, bloated public enterprises, and unnecessary regulations, among others. Most governments have recognized the need for investment protection, and many have guaranteed equal treatment for foreign and national investments.
