CLIR: Foreign Direct Investment
Foreign Direct Investment
Foreign Direct Investment (FDI) is a lens through which a country’s overall investment environment can be studied, providing insight into all investment, not simply that made from abroad. Foreign investors are often more sophisticated than local investors in a newly emerging market economies, and are more mobile – they are not captive to the local market, but go where the best opportunities lie. If a country cannot attract foreign investment effectively, it is unlikely that the environment is healthy for local investors either.
On the other hand, it is equally important to be aware of the opposite problem: Discriminating against local investors in favor of foreign capital. Excessive attempts to attract foreign capital usually indicate an unhealthy climate for local investment, often based on poor understanding of the nature of capital.
The CLIR indicators aim to analyze both sides of discrimination and strive to benchmark scores against a standard of non-discrimination that recognizes the unique needs of foreign investors, but neither unduly courts nor inhibits FDI.
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