THIRD LECTURE

Summary

Introduction

Direct private foreign investment has been fairly concentrated on the middle-income developing countries. Under 30 middle-income countries account for over go per cent of total direct private foreign investment, and within this group Brazil and Mexico, joined more recently by Singapore and Malaysia, dominate the figures. Over 60 per cent went to these four countries. But the small flow of investment (of the order of 5 per cent of total OECD flows) to the poorest countries does not necessarily reflect its importance. First, even these small flows may be quantitatively important in relation to the economy of a particular poor country. Second, even quite a small amount can be more important than the quantity indicates if it contributes a missing component, breaks a bottleneck, or has spread effects on the rest of the economy in technology generation, employment creation, or foreign exchange earnings. Since it cannot be expected that the total quantity of investment to the low-income countries will increase by much very quickly, or that host governments can do much to influence it, it is all the more important to concentrate on measures that get the maximum multiplier effects from whatever small investment there is. One proposal of this kind is discussed in the section on the judo trick. Other forms of new institutions are discussed below. An invitation to explore such approaches is the main theme of this lecture.