1. Foreign Finance, Investment, and Aid: Controversies and Opportunities
Chapter 14
Foreign Finance, Investment, and Aid: Controversies and Opportunities

2. The International Flow of Financial Resources
Three sources:
Private direct and portfolio investment
Remittances of earnings by international migrants
Public and private development assistance
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3. Private Foreign Direct Investment and the Multinational Corporation
Definition of MNC
Recent growth of foreign direct investment (FDI)
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4. Figure 14.1 FDI Inflows, 1980–2005
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5. Figure 14.2 FDI Inflows to Developing Countries in Relation to Domestic Investment,1990–2003
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6. Figure 14.3 Total Net Resource Flows to Developing Countries, 1990–2005
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7. Private Foreign Direct Investment and the Multinational Corporation
Multinational corporations: size, patterns, and trends
Private foreign investment: pros and cons for development
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8. Private Foreign Investment: Pros and Cons for Development
Traditional arguments in support of private investment: Filling savings, foreign exchange, revenue, and management gaps
Four main arguments
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9. Private Foreign Investment: Pros and Cons for Development
Traditional arguments against private foreign investment: Widening gaps
Two main perspectives of the arguments: Economic and ideological
transfer pricing
Reconciling pros and cons
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10. Table 14.1 Seven Key Disputed Issues about the Role and Impact of Multinational Corporations in Developing Countries
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11. Table 14.1 Seven Key Disputed Issues about the Role and Impact of Multinational Corporations in Developing Countries (continued)
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12. Private Portfolio Investment: Boon or bane for LDCs?
What is portfolio investment?
Emerging-country stock markets
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13. The role and Growth of Remittances
Wage differences
“Brain Drain”
Uneven flow of remittances
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14. Figure 14.4 Resource Flows to Developing Countries, 1990–2005
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15. Figure 14.5 Top 20 Remittance Recipient Countries, 2004
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16. Foreign Aid: The Development Assistance Debate
Conceptual and measurement problems
Amounts and allocations: public aid
Official development assistance (ODA)
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17. Table 14.2 Official Development Assistance Disbursements from Major Donor Countries, 1985, 2002, and 2005
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18. Table 14.3 Official Development Assistance (ODA) by Region, 2005
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19. Foreign Aid: The Development Assistance Debate
Why donors give aid
political motivations
economic motivations:
Foreign exchange constraints (two gap model)
Growth and savings
Technical assistance
Absorptive capacity
Self interest
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20. Foreign Aid: The Development Assistance Debate
The two-gap model:
savings constraint
(15.1)
Where
I is domestic investment
F is the amount of capital inflows
s is the savings rate
Y is national income
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21. Foreign Aid: The Development Assistance Debate
The two-gap model:
foreign-exchange constraint
(15.2)
Where
I is domestic investment
F is the amount of capital inflows
E is the level of exports
Y is national income
m1 is the marginal import share
m2 is the marginal propensity to
import
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22. Foreign Aid: The Development Assistance Debate
Why LDC recipients accept aid
The role of nongovernmental organizations (NGOs)
The effects of aid
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23. Conclusions: Toward a New View of Foreign Aid
Dissatisfaction among donors and recipients may create the possibility for new aid arrangements
Future aid is likely to be linked to market reforms and institutional capacity-building
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24. Case Study: Botswana
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25. Concepts for Review Absorptive capacity Aid weariness
Concessional terms
Economic transition
Emerging-country stock markets
Foreign aid
Foreign direct investment (FDI)
Foreign-exchange gap
Global factories
Multinational corporation (MNC)
Nongovernmental organizations (NGOs)
Official development assistance (ODA)
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26. Concepts for Review (cont’d)
Portfolio investment
Productive resources
Savings gap
Technical assistance
Tied aid
Transfer pricing
Two-gap model
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