Does Doing Business Matter for Foreign Direct Investment?
Doing Business, 2013
4 Pages Posted: 19 May 2020
Date Written: October 25, 2012
This case study presents evidence of a significant correlation between the doing business indicators and flows of foreign direct investment (FDI). Although this does not imply causation, the findings do support the claim that doing business reflects more about the overall investment climate than what matters only to small and medium-size domestic firms. More definitive conclusions about the relationship between doing business indicators and FDI will require more refined research. One initial step can be to dis-aggregate FDI by sector- for example, to compare the effect of business regulations on manufacturing FDI with their effect on resource extraction FDI. If such research supports the association between regulatory quality as measured by doing business and the size of FDI flows, government officials and business analysts will have even stronger justification for claims that better doing business rankings should attract more FDI.
Keywords: Business Regulation, FDI
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