How can a country increase its ability to attract FDI (foreign direct investment)?economy

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pohnpei397 eNotes educator| Certified Educator

The best thing that a country can do to increase FDI is to create a business climate that is stable and open.  First, the country needs to reduce the number of rules and regulations that stand in the way of investment.  For example, India tried to do this by allowing foreign ownership of retail stores but this attempt failed due to political pressure.  Those sorts of rules reduce the attractiveness of an economy for foreign investors.  Second, the country needs to create a stable environment.  Foreigners will not want to invest if, for example, they fear nationalization of their assets.  Of course, foreigners will also want to invest in economies that are growing, but economic growth is not something a country can simply order through legislation while the two things I mentioned can be implemented in that way.