How investment incentives distort FDI flows

Observatory

 

 These incentives tend to distort investment patterns much in the same way export subsidies distort patterns of trade. Industrialised countries are constantly involved in incentive wars to attract foreign investment. They offer substantial subsidies to multi-national companies (MNCs) to attract investments in particular locations.

 As developing countries lack the ability to provide matching financial subsidies, these incentives tend to distort the investment flow in favour of industrialised countries.

 Source : RIS, World Trade and Development Report, 2003