When a developing country decides to target higher levels of foreign direct investment (FDI), it needs to have a clear and prioritized strategic plan in place. The strategy should set out ambitious but achievable goals and targets and a coherent and logical set of actions to meet these goals and targets. An effective FDI strategy seeks to establish the location's strengths and weaknesses and the specific industry sectors that are compatible with these attributes. It also sets out the conditions and resources required to make the location fully competitive in attracting new investment from these sectors, such as:
- whether legal, policy, or regulatory barriers exist and the necessary steps to remove or alleviate them
- what infrastructure, skills, and other conditions need to be stimulated, and
- how the location will proactively promote for new investment.
Institutional Capacity
An important dimension of an FDI strategy entails ensuring adequate and competent institutional arrangements to deliver the desired strategic goals. This relates not only to the competence of individual institutions, but also to the overall institutional conditions and arrangements that need to be in place to achieve an effective and implement-able framework. An effective institutional framework ensures that:
- key functions are covered and not missing, overlapping, or duplicating, and
- efficient liaison and communications between relevant public sector bodies, and with private sector counterparts.
However, institutional development needs to be seen clearly as a means towards a greater end, namely FDI attraction.
The BIG Solutions team provides assistance to client countries on all aspects of FDI strategy development and implementation, including FDI benchmarking, sector identification and targeting, image building, and institutional reform. We have a wide range of tools available for client use