Table of contents
Foreign direct investment (FDI) has cooled dramatically. Many OECD countries are presently recording inflows of less than 25% of what they received just two years ago. However, developing countries and transition economies have been less affected by the decline. They now receive more than a third of worldwide FDI flows, underscoring the potential of direct investment to act as a catalyst for growth and sustainable development.
China is a case in point. In 2002, the Chinese economy became the world's foremost recipient of FDI, surpassing even the largest OECD countries. China's accession to the World Trade Organisation has played a role in this, but so have ongoing efforts at liberalising the national investment environment and improving standards for public and corporate governance.
China's ongoing challenge is to proceed with its efforts at moving from a system based on financial and other special incentives to rules-based policies for attracting investment. OECD’s views on FDI incentives are expressed in a recent Committee report released in the present edition.
A particularly important element of public governance is transparency. Past evidence shows that countries that fail to treat foreign enterprises in a sufficiently transparent manner are unlikely to attract economically relevant levels of FDI. The present issue of International Investment Perspectives contains a Special Focus dealing with the links between transparency and investment.
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