Comments on: The impact of Foreign Direct Investment in developing countries http://www.owen.org/blog/622 Thoughts from Owen in Africa Mon, 15 Mar 2010 08:38:28 +0000 http://wordpress.org/?v=2.9.2 hourly 1 By: Alex http://www.owen.org/blog/622/comment-page-1#comment-2372 Alex Wed, 18 Oct 2006 12:51:48 +0000 http://www.owen.org/blog/622#comment-2372 The silver bullet in this argument is that everyone knows that investment is investment, foreign or not, and the theory assumes FDI is especially good because the foreign direct investors bring technology and management skills into the country. OK. But surely they also bring their own errors? The silver bullet in this argument is that everyone knows that investment is investment, foreign or not, and the theory assumes FDI is especially good because the foreign direct investors bring technology and management skills into the country. OK. But surely they also bring their own errors?

]]> By: Adam http://www.owen.org/blog/622/comment-page-1#comment-2371 Adam Tue, 17 Oct 2006 13:09:27 +0000 http://www.owen.org/blog/622#comment-2371 <p>Definitely. I'd go even further and say in many cases it's not so much a case of  "special interests" as a function of the way patronage and clientilism works in very weak polities. No way you can pursue sector-specific policies that are time-bound if you're dependent on back-handers from those very same firms to pay off your clients and buy elections. I'm a big fan of Mushtaq Khan's work on politics, corruption and industrial development in that regard.</p> <p>You're absolutely right though that whilst we can't (at least now anyway, maybe 50 years ago!) influence the underlying structural politics of very poor countries very easily, we can certainly try and ensure that our firms and indeed governments aren't complicit in opaque payments.</p> Definitely. I’d go even further and say in many cases it’s not so much a case of  "special interests" as a function of the way patronage and clientilism works in very weak polities. No way you can pursue sector-specific policies that are time-bound if you’re dependent on back-handers from those very same firms to pay off your clients and buy elections. I’m a big fan of Mushtaq Khan’s work on politics, corruption and industrial development in that regard.

You’re absolutely right though that whilst we can’t (at least now anyway, maybe 50 years ago!) influence the underlying structural politics of very poor countries very easily, we can certainly try and ensure that our firms and indeed governments aren’t complicit in opaque payments.

]]> By: Owen http://www.owen.org/blog/622/comment-page-1#comment-2370 Owen Tue, 17 Oct 2006 12:15:07 +0000 http://www.owen.org/blog/622#comment-2370 Adam<br /><br />I agree.  Arguably, one of the great tragedies of many African countries is that their governments have been too weak and subject to pressure from special interests to pursue effective, time-limited sector-specific industrial policies.<br /><br />As you say, whether society benefits depends largely on the society and government in question: but I would add that rich country governments and firms can influence that a bit - for example, by being transparent about payments that we make to encourage accountability for how those revenues are used.<br /><br />Owen Adam

I agree.  Arguably, one of the great tragedies of many African countries is that their governments have been too weak and subject to pressure from special interests to pursue effective, time-limited sector-specific industrial policies.

As you say, whether society benefits depends largely on the society and government in question: but I would add that rich country governments and firms can influence that a bit – for example, by being transparent about payments that we make to encourage accountability for how those revenues are used.

Owen

]]> By: Adam http://www.owen.org/blog/622/comment-page-1#comment-2369 Adam Tue, 17 Oct 2006 09:35:48 +0000 http://www.owen.org/blog/622#comment-2369 <p>I am deeply suspicious of any studies that aggregate FDI up to the macroeconomic level rather than industry- or product- specific. It's clear that FDI in natural resources in poor African countries can have a deeply damaging effect on institutions and any broad-based concept of development. At the opposite end, the active intervention seen in East Asian countries to bring in sector-specific FDI and boost domestic input-output linkages and move up the value chain is great for industrial development and poverty reduction. </p> <p>Sitting back and passively waiting for FDI by creating an "enabling environment" is not how most successfully industrialising countries have done it. FDI comes in when there is profit to be made. It's that simple. Whether society benefits from that profit depends on the society and government in question.</p> I am deeply suspicious of any studies that aggregate FDI up to the macroeconomic level rather than industry- or product- specific. It’s clear that FDI in natural resources in poor African countries can have a deeply damaging effect on institutions and any broad-based concept of development. At the opposite end, the active intervention seen in East Asian countries to bring in sector-specific FDI and boost domestic input-output linkages and move up the value chain is great for industrial development and poverty reduction.

Sitting back and passively waiting for FDI by creating an "enabling environment" is not how most successfully industrialising countries have done it. FDI comes in when there is profit to be made. It’s that simple. Whether society benefits from that profit depends on the society and government in question.

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