countries but do not attract FDI from developed countries. Furthermore, fiscal incentives are found to attract FDI from developing countries but it is the removal of restrictions on their operations that is determinant for FDI from developed countries; ( _iii_ ) Bilateral investment treaties (BITs) which emphazise non-discriminatory treatment of FDI matter. However, BITs with developed countries have a stronger and more significant impact on FDI inflows compared to BITs with developing countries. One should be careful before drawing general conclusions from this study since FDI determinants are likely to be region- or subregionspecific.

Cleeve (2008) analyzes the **impact of fiscal incentives in attracting foreign investment to Sub-Saharan Africa (SSA)** . Only SSA countries are considered on the grounds that the determinants of FDI inflow to SSA are different from those to other regions—a view supported among others by Asiedu 2002; and Barta, Kaufmann and Stone 2003. Cleeve uses cross-sectional time series data on 16 Sub-Saharan African countries for 1990-2000. He controls for variables such as host country market size (GDP per capita), degree of openness to trade and FDI, political stability (political freedom and civil liberties) as a measure of country risk and human capital (secondary school enrolment ratio). He also introduces a proxy for public infrastructure quality, believed to increase the productivity of investment and FDI flow. Finally, three proxies capture fiscal incentives offered to foreign investors with a special emphasis on tax holidays (the most popular fiscal incentive in SSA). Both random effects models and fixed effects models are estimated. The results show that traditional variables and government policies to attract foreign investment to Africa are important. Tax holidays turn to be very important for attracting FDI and other incentive generally have no significant effect.<sup>16</sup> An interesting point concerns the UK, USA, Germany and France (which jointly account for almost 80 percent of FDI inflow to Africa in 1996-2000) that provide their firms investing abroad with foreign tax credits. In this case, fiscal incentives lose their attractiveness for foreign firms to increase investments since lower SSA taxes may be offset one-to-one in those countries. In other words, tax incentives lead to a transfer of resources from SSA to rich countries.

Harding and Smarzynska Javorcik (2007) deal with the impact of **investment promotion agencies (IPA) on FDI inflows in 1972-2005 using a sample of 109 countries,** three quarters of which are pertaining to developing countries. Investment promotion are activities through which governments aim at attracting FDI and encompass a wide range of areas including national image building, investment generation (identifying potential investors interested in establishing a presence in the country, developing a strategy to contact them and starting a dialogue to commit them to an investment project), investor servicing (assisting committed investors in analysing business opportunities, and establishing or maintaining a business) and policy advocacy (initiatives aiming to improve the quality of the investment climate and identifying the views of private sector in this area). In this kind of analysis, the potential endogeneity of IPA existence with respect to FDI inflows and the potential reverse causality problem arising from the fact that sector targeting is a choice of the IPA are issues. Harding and Smarzynska find that investment promotion efforts lead to higher FDI inflows to developing countries (in line with Wells and Wint 2000, Morisset and Andrew-Johnson 2004, Bobonis and Shatz 2007 and Charlton and Davis 2006). Second, targeted sectors receive more than twice as much FDI as non-targeted sectors. Third, some agencies are more successful to entice FDI than other ones, depending to whom they have to report. Harding and Smarzynska

> 16 Onyeiwn and Shrestha (2005) using a fixed effect panel regression on a sample of  10 Middle East and North African countries for 1990-99 show that FDI inflows are not influenced by corporate income tax rates despite the huge efforts made by these countries to cut their tax rates.

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