Some Types of Foreign Investment Are Better Than Others: A Look at Factors That Help FDI Boost the Local Economy | Making international trade work for development

Some Types of Foreign Investment Are Better Than Others: A Look at Factors That Help FDI Boost the Local Economy | Making international trade work for development: "But in the long run, the most important benefit FDI can bring is not through things so easily observable like jobs and taxes, but through the “spillover” of technology and knowledge (such as management and organizational practices) to local firms and workers. Such spillovers can help transform local economies by raising the level of productivity. But spillovers are not guaranteed. In too many countries, Lesotho and Swaziland included, FDI operates as an enclave, with few links to the domestic economy. Indeed, foreign investments may even have negative impacts on domestic competitiveness, at least in the short run; it might crowd out local investment, out-compete domestic firms, or corner the market for skilled workers. It turns out that foreign investment is not unambiguously good. Rather, how advantageous it is depends on a number of conditions."

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