Occasional Papers Series

Improving the Business Environment in Latvia: The Impact of FIAS Assistance (November 2007)

This paper tracks the process through which FIAS, the investment climate advisory service of the World Bank Group advised the government of Latvia from 1998 to 2004 on ways to improve the business environment, achieve higher rates of economic growth, and thereby alleviate poverty.

Competition Policy and Promotion of Investment, Economic Growth and Poverty Alleviation in Least Developed Countries (October 2007)

Competition between firms for customers can enhance both economic efficiency and consumer welfare. Yet the process of competition is not automatic. Even when economic reforms are put in place to ensure a pro-competitive business environment, the benefits of a strong market economy and the interests of consumers can be thwarted by anti-competitive business practices.

Reducing Administrative Barriers to Investment: Lessons Learned (May 2006)

FIAS’s work in the area of administrative barriers was the subject of an independent, external review in 2004, which found that, for the most part, such projects have been quite effective at improving the investment climate of client countries.This publication provides the “lessons learned” from FIAS’s efforts in this area—lessons that can be put to use in almost all countries.

The Effectiveness of Promotion Agencies at Attracting Foreign Direct Investment (October 2003)

This study aims at providing some guidance to policymakers and managers of these agencies that are interested in understanding the conditions, both external and internal to these agencies, that may make them more effective in influencing the location decision of multinational firms.

Using Tax Incentives to Compete for Foreign Investment: Are They Worth the Costs? (September 2001)

The book contains complementary essays on the use of tax incentives, to attract foreign direct investment (FDI). The first essay presents results of the authors' original research, and explores FDI, and issues of tax incentives, in the context of Indonesia. Their results mostly support the arguments made against incentives, particularly they find little evidence that when Indonesia eliminated tax incentives, there was any decline in the rate of FDI into the country. Similarly, the second essay surveys the research of others on the same topic, and pertaining to the same issues discussed in the first essay. They show that results of other researchers, are generally consistent with the findings of the research in Indonesia, notably that tax incentives, neither affect significantly the amount of direct investment that takes place, nor usually determine the location to which investment is drawn. Nevertheless, recent evidence has shown that when factors such as political, and economic stability, infrastructure, and transport costs are more, or less equal between potential locations, taxes may exert a significant impact. This is evidenced by the growing tax competition in regional groupings (i.e., the European Union) or, at the sub-regional level within one country (i.e., the United States). Both essays provide a basis for much more sophisticated analysis by policymakers than previously, and, both are important because they question governments' institutional arrangements that create agency problems with respect to tax incentive policies.

Administrative Barriers to Foreign Investment: Reducing Red Tape in Africa (June 2000)

The book consists of two papers which provide an overview of administrative barriers in Africa, and a very in-depth look at how one country, Mozambique, used a very large foreign investment as a mechanism to begin to tear them down. The first paper is based on a series of country-specific studies on administrative barriers done by Foreign Investment Advisory Service (FIAS) and the United States Agency for International Development. These studies covered Ghana, Mozambique, Namibia, Tanzania, and Uganda. Each country study relied on review of primary materials, laws, and regulations. The second paper is a detailed look at how the administrative barriers that existed in Mozambique threatened to derail the huge Mozal aluminum smelter that was proposed by South African investors. Not only were the barriers overcome for this special project but also the Government used the knowledge gained in the process to reduce barriers for all investors and establish institutions that could facilitate other investments. The message in both papers is that administrative barriers constitute a significant impediment to foreign direct investment in Africa. Many of the administrative procedures required of investors have no real justification. Removal of unnecessary barriers and streamlining other administrative procedures require detailed efforts by governments involving the exercise of significant political leadership.