Best Policy Practices for Promoting Inward and Outward Foreign Direct Investment

Best policy practices for attracting foreign direct investment and for promoting “spillover” productivity benefits from that investment are “framework policies”—such as transparent regulations and solid infrastructure and education policies.

It is less clear from the evidence whether policies that specifically target foreign investors—such as subsidies and tax breaks—are best practices for attracting investment. Such policies could even reduce any spillover productivity effects from that investment.

Although there is less evidence on what directly encourages outward foreign direct investment, it is clear that the framework policies that favour inward foreign direct investment also encourage outward direct investment over the longer term.