This paper discusses the factors affecting foreign direct investment (FDI) in developing countries and describes their impacts. It focuses on the mechanisms used to attract FDI and considers how aid and trade policies can influence FDI and boost domestic economic development.

The author suggests that aid can be used to build up human capital and improve infrastructure and institutional frameworks, thereby attracting FDI. Trade policies stimulating exports and market access for host countries can also attract FDI.

This paper will be particularly useful to policymakers and policy analysts tackling FDI promotion in developing countries.