- The Washington Times - Wednesday, July 7, 2010

The World Bank on Wednesday presented in Vienna, Austria, its first study of foreign direct investment in 87 countries and proposed changes to some national laws.

Dubbed Investing Across Borders, the study assesses how national laws on foreign businesses affect investment in a particular country and compares their success to that of other countries.

Researchers were unable to measure all aspects of a country’s economic success, such as natural resources, so they limited the study’s scope to regulations on foreign direct investment, which governments can choose to change.

“We want to suggest areas for improving competitiveness,” said Pierre Guislain, director of the Investment Climate Department of the World Bank and co-author of the study.

In general, the report found that restrictive laws and red tape discourage foreign direct investment, and many countries with such laws have not done as well economically. Large markets such as China’s were the exception.

Mr. Guislain said after the event that he was pleasantly surprised by the positive response, saying that he got good questions and feedback.

“The best part was that we got across the view that governments can affect foreign direct investment … with the stroke of a pen,” he said in an interview.

Mr. Guislain said the idea for the study came as many smaller countries were asking the World Bank for help in attracting foreign direct investment (FDI). Almost as an answer, the study found that smaller countries tended to have more restrictive laws.

He also said the governments can decide what is best for their economies; the World Bank just wanted to provide an objective report about FDI.

“Not all FDI is positive, and neither is domestic investment,” Mr. Guislain said, noting that FDI is not the primary player in China’s economy.

However, he said smaller countries would need to attract foreign businesses more than larger ones, adding that he hopes that this study will help them.

He and other members of the research team will travel to the studied countries from September to November to present their findings in more detail. Mr. Guislain said he hopes to see reform in some countries once a second study comes out next year.

“This is mostly to show the hurdles to FDI, and that [the countries] may want to remove them,” he said.

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