Publication Date

Spring 4-15-2013


Many developed nations often wish that developing nations seek more investment from them. In 2005 and 2007, Germany and the United Kingdom made foreign direct investment to developing nations one of the themes of the G8 Summit. In particular, the United Kingdom wants to increase foreign direct investment (FDI) in developing nations in order to promote the development of these nations and improve the competitiveness of the British firms.In this context, an examination of the global legal structures that affect FDI is necessary.

In general, there are three factors that affect FDI motivations. First is the size and growth possibility of the market. Second is the protection of legal rights (e.g., property rights, contract rights) that affect investment decisions. Third is the availability of resources (e.g., finance, technical skills, and specialized information). Any uncertainty surrounding one or more of these factors can be a major impediment to FDI.

Uncertainty in many nations can involve large sunk and irreversible costs, causing delays and inefficiencies. These delays and inefficiencies can inhibit the progress of any profit-enhancing and/or poverty-reduction initiatives. This article will examine the history of FDI as well as the legal, economic and political issues associated with it.