SUNS #4621 Tuesday 7 March 2000
south-north development monitor SUNS [Email Edition]
Development: FDI useful only when hosts control... & regulate (Chakravarthi Raghavan, Geneva)
Peru: Traditional knowledge enhances modern medicine (IPS, Lima)
Russia: The science brain drain (IPS, Moscow)
Labour: Modern slavery - forcing millions of women into sex trade (IPS, Mexico City)
Kenya: New maize variety to boost harvests (IPS, Nairobi)
Germany: Redesigning aid in times of scarce money (IPS, Bonn)
DEVELOPMENT: FDI USEFUL ONLY WHEN HOSTS CONTROL, DIRECT AND REGULATE
Geneva, 6 Mar (Chakravarthi Raghavan) -- The thesis that foreign investment is always good for development, and that a liberal policy towards foreign investment and Transnational Corporations (TNCs) is sufficient to achieve positive effects is challenged in a just published study by two Latin American economists.
The study shows that there is "crowding in" effect of FDI on domestic investments only where developing country-governments have maintained restrictive regimes and subjected FDI applications to screening and grant of different incentives to different firms.
But in countries that maintained or moved to 'open' regimes for TNCs and their investments, there is strong evidence of a "crowding out" effect on domestic investment, the study brings out.