Strengthening the development impact of UNCTAD\u27s investment policy reviews

This study has been carried out for the German Ministry for Economic Cooperation and Development (BMZ) in cooperation with HWWA and UNCTAD. The study focuses on two issues: • the role of FDI in generating economic growth in developing countries; • how should UNCTAD’s Investment Policy Review process be organized to attract more and better FDI? Compared to a number of simplistic positions, which tend to demonize either the role of FDI in developing countries or those who see them as a “deus ex machina” for the promotion of economic growth, the approach adopted by the authors is highly differentiated. In line with a number of recent studies on FDI and development, the authors emphasize the need to analyse the specific circumstances and conditions of a given country to determine whether and how FDI can promote economic growth. According to the authors, a central precondition for FDI to play a positive role in generating growth effects is the existence of a certain absorption capacity in host countries. They also point out that basic conditions of internal stability and transparency must be fulfilled to set the stage for FDI inflows. In this context it is also emphasized that, even in cases where in principle a sound FDI perspective exists in a country, FDI should be considered more as one factor of development alongside domestic investment in both real and human capital. After this rather brief, but very general discussion of the role of FDI in developing countries, the main part of the study focuses on various issues relating to UNCTAD’s Investment Policy Review (IPR) process. The issues discussed are based on long experience of UNCTAD’s IPR programme in more than 15 countries. The authors conduct a detailed analysis of various content-related issues (e.g. should there be a sector-specific FDI policy?) as well as process- and implementation-related issues (e.g. how should stakeholders be more closely involved, or how could coordination with other institutions, such as the World Bank, OECD and UNDP, be intensified?). Another important issue discussed is the criteria for selecting the countries for which an IPR should be organized. Even though the report and recommendations are addressed mainly to those actors and decision-makers who are directly or indirectly involved in the practical IPR process, they also provide interesting insights for academic and non-academic experts in this field