Regulation of Foreign Investment in Historical Perspective
Author(s)
Chang, Ha-Joon
Abstract
Based on a historical survey, the article argues that during their early stages of development, now-developed countries systematically discriminated against foreign investors. They have used a range of instruments to build up national industry, including: limits on ownership; performance requirements on exports, technology transfer or local procurement; insistence on joint ventures with local firms; and barriers to “brownfield investments” through mergers and acquisitions. We argue that, only when domestic industry has reached a certain level of sophistication, complexity, and competitiveness do the benefits of non-discrimination and liberalisation of foreign investment appear to outweigh the costs. On the basis of this, the article argues that the currently proposed multilateral investment agreement at the World Trade Organisation is likely to harm the developing countries’ prospects for development.
