Developing countries can attract and support foreign direct investment (FDI) by creating open markets which are transparent and dependable. Reduced restrictions create conditions that allow FDI inflows by creating entry points on the market and producing flexible labor regulations or protections of intellectual property. A country can introduce investment promotion that would target foreign investors and connect them with domestic sectors and businesses which may benefit from multinational investors (Moran, Görg, Seric, & Krieger-Boden, 2017).
Once the policy and regulatory framework are in place, the next aspect of attracting FDI for developing countries is economic determinants. Determinants can consist of location-bound resources, size of markets for trade, and production capabilities or cost-advantages. Quality and availability of infrastructure, market growth, technology, and human capital are also considerable factors (Sauvant, 2015). If these economic determinants are weak or non-existent, then any foreign investment will be ineffective and result in low net outflow values.
Finally, it is crucial to increase the contribution of FDI inflows that would create incentives for further investment. This ties in with investment promotion and helps to build a solid case for developing nations. The United Nations has recently emphasized the critical role of FDI in attaining sustainable development goals such as food security. A country can exploit its competitive advantage to grow its economy. It will help to regulate sustainability and improve risk management that provides better access to financial markets (Svensson, 2015).
References
Moran, T., Görg, H., Seric, A., & Krieger-Boden, C. (2017). Attracting quality foreign direct investment in developing countries.Web.
Sauvant, K. P. (2015). Attracting foreign direct investment and benefiting from it: Challenges for the least developed countries. Transnational Corporations Review, 7(2), 125-127.
Svensson, T. (2015). Ten guiding principles to encourage foreign direct investment.Capital Finance International. Web.