The Voice of Foreign Direct Investment : Foreign Investor Policy Preferences and Experiences inDeveloping Countries

This paper provides insights to inform government efforts to attract and retain foreigndirect investment, by analyzing the results of a survey of more than 2,400 affiliates of multinational enterprisesacross 10 middle-income countries. The paper explores corporate perspectives and decision-making on countries’legal and regulatory environments, political risk, and investment promotion activities. The survey finds that abusiness-friendly policy environment is critical to multinational enterprises’ investment decisions, confirmingthe importance of removing regulatory barriers to foreign direct investment (particularly approval processes),lowering political risks, and having investment promotion agencies. The survey results also show that investors areheterogeneous, with affiliates’ sectors, trading behaviors, sizes, ages, source countries, and foreign ownership levelsaffecting their perceptions of and sensitivity to various policy factors. Thus, policy makers should tailor theirpolicy efforts to the needs of priority investor segments. Notably, the analysis consistently finds variation based onthe extent to which affiliates import their inputs, suggesting that this relatively understudied topic deservesincreased research and policy attention.