subject: Foreign Investment & Developing Economies [print this page] Consistent value Consistent value
MNCs are shown to create substantial value for host countries, regardless of whether investments are seeking new consumers or simply trying to tap into lower local production costs. Only one example, in the form of retail banking in Brazil, has such investment failed to make a significant difference.
In every other case, foreign investment consequential effects have stimulated supplier businesses and fostered improvements in technology and skill. Albeit, in some cases, jobs have been lost through elimination of inefficient local players or streamlining inefficient production operations; benefits to consumers are significant in terms of lower prices, more product choice, and increased productivity, which in turn increases national wealth.
Policy implications
Barriers to foreign investment and trade can create a competitive disadvantage for developing nations, rendering the considerable benefits of the global economy inaccessible to them. Targeted incentives, by the same token, rarely have a positive effect and often create harmful unintended consequences.
Governments can more effectively grow MNC investments by putting the basic building blocks of productivity in place, through strengthened power, transportation, and legal infrastructures, and the enactment and enforcement of clear and consistent official policies.
