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Abstract

This paper reviews the literature and analyzes foreign direct investment using UNCTAD methodology to test the role of this form of cash flow in economic development. Direct investment in another country is the most advanced form of foreign capital inflow as it supplies know how. Many developing countries are becoming potential targets for foreign investments. Among the numerous groups of developing countries, the emerging markets attract 80 percent of foreign direct investment. Our analysis concludes that the allocation of capital within the emerging markets group is not even. Five out of 25 countries (China, Hong Kong, Mexico, Singapore, and Brazil) dominate in attracting over 60 percent of the cash flow. In that regard, a large part of the analyzed group, 18 countries, is assessed as having a high potential for attracting foreign capital.

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