Foreign direct investment, development and the new global economic order. A policy brief for the South

Preface Over the last decade and a half the global economic order has been undergoing major changes. While this may be thought to reflect the results of a multilateral and participatory process involving debate and negotiations, in reality it has been mostly driven by the economic interests of the North. The developing countries have been marginal participants, often feeling they have little choice but to follow Northern proposals. They have had little impact on the final outcomes in terms of the shape of the emerging global economic structures and policy regimes. Yet, these outcomes and structures are likely to prove a major and often determining factor in their future development, for better or for worse. Although the North achieved many of its objectives in the Uruguay Round, its proposals for a new liberal world economic order have still not been fully realized. One of the most important objectives still outstanding is a highly liberalized international regime governing foreign direct investment (FDI), with the policy emphasis on securing the rights of foreign investors and defining the obligations of host country governments. The purpose of this policy brief is to assist developing countries assess individually and as a group their response to the current drive for a global regime to establish free flows of FDI. The bulk of the document is therefore devoted to a review of the key economic issues that need to be taken into account by developing countries in shaping their policy stand on FDI matters. The rest of the document is mainly devoted to reviewing the related challenge they currently face in the international policy and negotiating arena and outlines some options. This preface, however, draws attention to the broad political context in which national policies are formulated, and multilateral discussions and possibly negotiations on such matters take place.