In developing countries, foreign direct investment (FDI) has a bad reputation. Various debates have compared it to postcolonial exploitation of raw minerals and cheap labor. FDI inflows to emerging countries’ medium and high-skilled manufacturing sectors, on the other hand, are increasing, reflecting increased income levels.
Attracting quality FDI strategies
Following are the attracting quality FDI strategies:
Allow for FDI inflows through opening markets.
Reduce the restrictions on FDI.
Provide open, transparent, and dependable conditions for all types of businesses, both domestic and international, such as ease of doing business, access to imports, generally flexible labor markets, and protection of intellectual property rights.
Create a Promotional Agency for Investment (IPA).
A good IPA may be able to identify eligible overseas investors and function as a link between them and the domestic economy. On the one hand, it should act as a one-stop-shop for all of the host country’s investor demands.
On the other side, it should act as a catalyst in the local economy of the host country, encouraging it to invest in high-quality infrastructure and providing ready access to qualified people, technicians, engineers, and managers.
It should also take part in post-investment care, taking into account the demonstrable impacts of satisfied investors, the potential for reinvestments, and the potential for cluster development as a result of follow-up investments.
Consider which sectors or activities should be addressed.
The large multinational investors in the host economy may affect supplier investment and location decisions.
Build the infrastructure.
An appropriate and stable supply of energy, an adequately skilled workforce, and vocational training facilities for specialized workers are all requirements of a quality investor, all of which should be designed in partnership with the investor (Ibid.).
Encourage FDI spillovers into the domestic economy.
Local enterprises formed by executives who previously worked for multinational corporations are more successful and productive than those founded by others.
Local company executives study and copy their global competitors to learn about new technology and marketing methods. Similarly, information is disseminated by labor transfers from multinational to local businesses.
First-time foreign direct investment should be encouraged.
Foreign corporations who do not have a huge network of subsidiaries are more eager to deal with domestic suppliers.
Encourage diaspora members to invest in foreign direct companies.
These are also more likely to form relationships with local firms and contribute to the globalization of the host country.
Improving domestic financial markets
More people will have access to credit as domestic financial markets improve. Creation of a business-friendly financial system allows local enterprises to adapt to the challenges and impulses of foreign entrants, self-select into supplier status, and thus grow and prosper.
The guidelines’ major objective is to encourage a light industrial strategy that tries to link FDI to development goals while also generating as many backward links into the host economy as possible. The research presented here demonstrates that by focusing on the correct factors, poor countries may prosper without considerable levels of protection or large amounts of direct aid.