Openness, Investment Climate, and FDI in Developing Countries

The paper assesses the importance of openness, infrastructure availability, and sound economic and political conditions in increasing developing countries' attractiveness with respect to FDI. The results show that these factors are particularly important for South Asia, Africa, and the Middle E...

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Bibliographic Details
Published inReview of development economics Vol. 11; no. 4; pp. 607 - 620
Main Authors Sekkat, Khalid, Veganzones-Varoudakis, Marie-Ange
Format Journal Article
LanguageEnglish
Published Oxford, UK Blackwell Publishing Ltd 01.11.2007
Wiley
Subjects
Developing Countries
Development economics
Economic Development
Economics and Finance
Foreign Investment
Humanities and Social Sciences
Infrastructure
LDCs
Studies
Middle East
Asia
Africa
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Summary:The paper assesses the importance of openness, infrastructure availability, and sound economic and political conditions in increasing developing countries' attractiveness with respect to FDI. The results show that these factors are particularly important for South Asia, Africa, and the Middle East. The paper also shows a higher impact of these factors on FDI in the manufacturing sector than on total FDI. The message to developing countries' policymakers is twofold. First, efforts towards openness should be initiated or further increased in order to make their economies attractive to foreign investors. Second, improvements in other aspects of the investment climate are important complements to openness and result in additional and sensitive increases in FDI inflows.
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The authors would like to thank an anonymous referee as well as L. Achy, M. Lahouel, M. Nabli, A. Varoudakis and participants to the conferences of the World Bank ABCDE‐Europe (Brussels, 2004) and the FEMISE (Marseilles, 2003) for very helpful comments. The authors acknowledge financial support from the World Bank and the FEMISE network. The views expressed in this paper are those of the authors, not of their institutions.
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ISSN:1363-6669
1467-9361
DOI:10.1111/j.1467-9361.2007.00426.x