Foreign Direct Investment Flows to Low-income Countries: A Review of the Evidence

Foreign direct investment is viewed as a major stimulus to economic growth in developing countries. Its ability to deal with two major obstacles, namely, shortages of financial resources and technology and skills, has made it the centre of attention for policy-makers in low-income countries in particular. Only a few of these countries have been successful in attracting significant FDI flows, however. This paper reviews the recent evidence on the scale of FDI to low-income countries over the period 1970- 96 and major factors determining foreign companies' decisions to invest in a particular country.