2 FDI projects also can provide greater access to world markets for hostcountry exports. Because of their ties to parent corporations in the home country and other affiliated corporations in third-country markets, FDI projects in developing countrios facilitate market penetration and market expansion in countries where they have corporate connections. Further benefits in the economy of the host country ran occur as the -sult of the stimulus FDI often gives to local entrepreneurs, competitors, and nnovators. The entry of a foreign firm using different components or assembl) techniques, for example, can have such effects.

In addition to these benefits of FDI are the usual employment and incomegenerating effects of an investment--whether undertaken by a domestic or foreign firm--and the immediate or long-term balance of payments effects of the associated international financial flows. There are, of course, social costs as well as benefits associated wich FDI projects. For instance, FDI can have adverse effects in a highly protected environment, by leading to high cost production. There are, moreover, important issues about the distribution of the costs and benefits within and between the host and home countries. Although these additional considerations can mitigate ard complicate the net beneficial effects of FDI in the host country, they do not alter the contribution that FDI can make in the long-term development process. There is therefore a need for countries to adopt policies that are more conducive to FDI so that its role in the development process can be expanded.

The analysis of FDI presented here is based in substantial part on the country studies that appear in Foreign Direct Investment in Selected De loping Countries in the Last Two Decades by Gyorgy Becsky, Young-Hoi Lee, and Aloysius Ordu. Those recently completed jtudies concern FDI in eleven countries: Argentina, Btazil, Colombia, and Mexico in Latin America; India, Indonesia, Malaysia, Republic of Korea, and Thailand in Asia; and Nigeria and Kenya in Africa. Those countries were selected for their geographic, economic, and policy diversity; they include both oil exporters and oil importers. Some of the countries have adopt-d relatively restrictive policies toward FDI, while others have been more open, especially in recent vears. Mosz of them are major FDI recipients, and many are newly industrialized co'-ntries with substantial exports of manufactured goods. They have collectively been the recipients of approximately half of the FDI flows to all de -eloping countries during the past decade. In total, these eleven countries provid , useful sample for the study of FCI.

# Data Issues

Foreign direct investment is a long-term investment that can include new equity investments, reinvested earnings, and related lending. Any given investment can involve establishing, acquiring, or expanding an affiliated subsidiary corporation or branch. An essential element of a direct investment (contrasted with a portfolio investment) is a continuing substantial interest ir., and an effective voice in, managing the real assets of a foreign affiliated entity. An ownership share of at least 10 to 25 percent is commonly considered the minimum threshold for an investment to be considered a direct investment, but the essential ingredient is control over asbets. Where there is no eubstantial influence in the management of the foreign enterprise, the investment is