Liberalization and Promotion of Inward Investment

Abstract

This chapter focuses on policies of investment liberalization and promotion, both at the host state and at the bilateral, regional and multilateral levels. In all cases, the aim has been to remove barriers to inward foreign direct investment (FDI) in the belief that this will offer positive economic gains to states and to the global economy. However, the removal of host state controls cannot automatically guarantee adequate levels, or useful kinds, of inward investment. Nor will it guarantee an equitable international distribution of its benefits. Moreover, competition over investment incentives between states may create economic distortions between them, with little positive gain. The reduction of barriers to direct investment, and the use of investment incentives, stand to benefit multinational enterprises (MNEs), as they can establish operations over a wider geographical space and can enjoy reduced investment risks. Against this background, the major home states of MNEs have placed the reduction of barriers to FDI onto the agendas of regional and multilateral economic organizations, with some success.