Foreign direct investment, smart policies and economic growth

Abstract

Developing economies need foreign direct investments to complement domestic investment with a view to increase capital accumulation, productivity and growth rates. But, foreign direct investments (FDIs) may have costs in addition to the well-known benefits to the host country. Generating higher net benefits from FDI necessitates design and implementation of smart' investment policies by the host countries rather than the current orthodoxy of neutral' FDI policies, which is based on liberalizing the FDI inflows and aim to attract any' kind of FDI. In this article, we discuss such polices and how they relate to host country circumstances.