How FDI help to foster growth, value addition and industrial development

With the right policies in place, quality foreign direct investment (FDI) can be a key driver for the growth of domestic enterprises and help improve investment climate. This was emphasized by LI Yong, Director General of the United Nations Industrial Development Organization (UNIDO) at the Vienna Investment Conference, organized by UNIDO and the Kiel Institute for the World Economy, which brought together prominent experts in the field. Holger Görg, Head of the research area The Global Division of Labor at the Kiel Institute, pointed out that FDI through multinational enterprises create jobs and bring knowhow and technology into a country.

“If the right incentives are designed to strategically direct FDI towards target areas with high growth potential, quality FDI, driven by the activities of multinational enterprises, can help achieve inclusive and sustainable industrialization, foster innovation and build resilient infrastructure, as set out in Sustainable Development Goal 9,” said Director General Li. Goal 9 is one of the 17 goals of the UN Agenda 2030 for Sustainable Development, and focuses on building resilient infrastructure, promoting sustainable industrialization and fostering innovation. „In general, multinational enterprises create jobs which require higher skilled workers and they pay higher wages, than local enterprises do. The technology they bring with them, can be adopted by local companies, which leads to a higher productivity and higher wages in the country as a whole”, Görg said.

Participants discussed various policy options and global best practices geared towards attracting and harnessing quality FDI. Theodore Moran of Georgetown University highlighted three policy components that are crucial in attracting quality FDI. They include efficient infrastructure, access to trained workforce, and labor market flexibility.

Beata Javorcik of the University of Oxford underlined the importance of well-implemented investment policy as a tool for bringing about quality FDI through targeting specific activities as opposed to sectors.

Douglas van den Berghe of Investment Consulting Agencies (ICA) stressed three key factors that are crucial to private investors in terms of FDI: transparency, stability and predictability.