The role of foreign direct investment in less developed countries

This chapter analyses a number of economic and developmental issues in less developed countries (LDCs), reviewing the related literature and outlining the
challenges ahead for LDCs. The issues considered include foreign direct investment (FDI) policies, recent trends on growth, civil conflict, institutional development, financial sector development, external debt, and other macroeconomic factors. These are identified as pertinent areas where LDCs have faced major challenges in their endeavours to improve economic welfare since they are related to the absorptive capacities, which are important for accruing growth benefits from inward FDI in LDCs. It is anticipated that coverage of these issues will enlighten the issues that these countries face in order to attract and utilise inward FDI. Additionally, it is argued that LDCs can avoid the risk of civil conflict by adopting proactive policies to attract FDI.