Kiel Working Papers, Kiel Institute for World Economics
No 1128:
To What Extent Can Foreign Direct Investment Help Achieve International Development Goals?
Peter Nunnenkamp
Abstract: For FDI to help achieve the international development goal
of halving absolute poverty, two conditions have to be met. First, poor
developing countries need to be attractive to foreign investors. Second,
the host-country environment in which foreign investors operate must be
conducive to favourable FDI effects with regard to overall investment,
economic spillovers and income growth. This paper argues that it is much
more difficult to benefit from FDI than to attract FDI. Weak markets and
institutions typically prevailing in poor countries tend to seriously
constrain the growth-enhancing and povertyalleviating effects of FDI. The
crux is that creating an environment in which FDI may deliver social
returns will take considerable time exactly where development needs are
most pressing.
Keywords: Development financing, domestic investment, economic growth, poverty reduction; (follow links to similar papers)
JEL-Codes: F30; (follow links to similar papers)
46 pages, October 2002
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