According to Torfinn Harding and Beata Smarzynska Javorcik of the University of Oxford, investment promotion agencies (IPAs) are highly effective in attracting investment to less-developed countries and far less so in promoting investment between developed countries. A small amount spent on promoting investment in such countries brings in a huge return both in FDI inflows and in job creation.
Friday, August 10, 2012
Article published last year by Vale Columbia Center on Sustainable International Investment:
Why and how least developed countries can receive more FDI to meet their development goals
The 48 least-developed countries (LDCs), most of them in sub-Saharan Africa and a few in Asia, need foreign direct investment (FDI) to help meet their development targets. The FDI they now receive, although inadequate, is enough to demonstrate that investors see potential in them. It is therefore realistic for LDCs to seek more FDI, but they need to enhance their investment environments to attract it in the much greater quantities required. Donors can help by targeting official development assistance (ODA) on investment in human capital and supporting governance improvements. Meanwhile, LDCs should establish effective investment promotion agencies (IPAs).
This is a chicken and egg situation. Investors, both domestic and foreign, mostly shun conflict zones, which therefore tend to remain -- or become -- poor, providing few employment opportunities other than ones that make the situation worse (child soldier, terorrist).