Less-developed countries and private foreign direct investment: A review article

Abstract

This paper is partly a review of an important new work by Professor G. L. Reuber and associates on the economics of private foreign manufacturing investment in less-developed countries (LDCs),’ and partly an attempt to examine some of the larger issues facing the study of such investment. Reuber’s book is an interesting and provocative one, and in this essay 1 shall concentrate on the first 250 pages which contain the analytical sections, and which constitute a vigorous defence of foreign investment in LDCs. The book also contains 5 appendices on its strucNre and distribution, the characteristics of selected projects, the interview procedure and the sources and definitions of the data. The analysis is based on published and unpublished information as well as on direct interviews with about 80 investing firms, and claims to be a major contribution to our knowledge in this field. Private Foreign Investment in Development is the first work which deals exclusively with the general problem of foreign investment in LDCs, and, as such, is destined to become a standard text in the field. The argument and methodology of the book seem academic and thorough, and its tone appears to be neutral and objective. The authors have, however, a large axe to grind: they are concerned to establish the benefits of foreign investment for LDCs, and to prove their case they summarily dismiss many valid criticisms of foreign investment; their conclusions are, moreover, derived from a set of value judgements which are not explicitly defined and which may be regarded as unacceptable by many groups affected by foreign investment. A review of this book may, therefore, serve as an appropriate place to discuss some of the basic values underlying the study of foreign investment. Part 11 uses a simple taxonomy to highlight some of the important elements on which different approaches to foreign investment are based; Part Ill evaluates Reuber’s work in terms of this taxonomy and in terms of his treatment of some specific issues related to foreign investment.