Since the last decade there has been a considerable change in global flows of trade and finance, including a surge in foreign investment and a decline in debt
financing. Such changes have also transformed external finance to poor countries with an increase in Foreign Direct Investment (FDI) and a decline in foreign aid. FDI flows to poor countries increased to almost 3 percent of GDP and 15 percent of domestic investment. FDI benefits poor countries not only by supplementing domestic

 

 

investment and declining aid flow, but also in terms of employment creation, transfer of technology and increased domestic competition. Perceptions of civil society have also changed over time towards a positive direction. While FDI in developing countries has increased in the last decade, the distribution of FDI inflows remains quite uneven across the countries. Very recently, FDI flows marked a drastic fall due to the global recession that made FDI even more competitive. Although the positive benefit of FDI is now recognised, there is also evidence that large FDI inflow is not sufficient for domestic gain.