ABSTRACT
Rapid growth of cross-border capital flows has been one of the most spectacular tendencies observed in the world economy in the last decade of the twentieth century. Stimulated by liberalization of capital transactions and supported by rapid progress in applications of information and telecommunication technology, international capital flows increased systematically, moving to countries and sectors with high returns and low risks, and adding to domestic capital resources of recipient economies. One of the most important categories of international capital flows has been FDI. The annual flows of FDI increased from the average of USD 200 billion in 1989–1994 to almost USD 1.3 trillion in 2000, while their share in total world gross capital formation increased in the same period from the average of 4.1 per cent in 1989–1994 to 16.3 per cent in 1999 (UNCTAD, 2001).
