FDI-facilitated Development: The Case of the Natural Gas Industry of Trinidad and Tobago

Since the last decade, governments in less-developed countries have increasingly viewed Foreign Direct Investment (FDI), as directed by the multinational enterprise (MNE), as a catalyst for economic growth and transformation. Indeed, the literature argues that FDI-assisted development occurs when a less-developed country assimilates, adapts and diffuses the positive externalities arising from the interaction of the MNE's ownership advantages with its locational attributes (e.g., Dunning 1981, 1988). This paper, however, posits that FDI-facilitated development is not an effortless process. It only occurs when host developing-country governments implements selective intervention policies that are aimed at increasing indigenous technological capabilities (e.g., Lall 1996, 1997). This paper explores this issue by examining the experience of Trinidad and Tobago, a recipient of substantial FDI inflows in its natural gas industry for the last decade. This paper clearly shows that FDI-assisted development only occurs when governments in less-developed economies pursue credible, selective intervention policies