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Retention and Expansion of Foreign Direct Investment (Vol. 2) : Political Risk and Policy Responses (English)

Due to its recognized benefits, most countries today regardless of their level of development compete for and dedicate significant resources to attracting foreign direct investment (FDI). Capturing the full positive spillovers of FDI is a long-term process and requires regulatory certainty and predictability to enable strategic business planning. This paper aims to fill this gap in evidence-based policy making, by contributing to the understanding of how political risks emanating from government conduct affect FDI and proposing a tool for governments to help investors retain and expand investments. Based on investor survey data and empirical analysis of investor-state dispute settlement (ISDS), the paper aims to draw attention to this issue and to highlight that many countries may inadvertently be losing significant amounts of FDI. The paper responds to an urgent need for governments to provide a minimum institutional infrastructure that can enable a lead agency to identify, track, and manage conflicts arising between investors and public agencies as early as possible.


  • Author

    Echandi,Roberto, Nimac,Ivan Anton, Chun,Dongwook

  • Document Date


  • Document Type

    Working Paper

  • Report Number


  • Volume No


  • Total Volume(s)


  • Country


  • Region

    The World Region,

  • Disclosure Date


  • Disclosure Status


  • Doc Name

    Political Risk and Policy Responses

  • Keywords

    foreign direct investment; multilateral investment guarantee agency; lack of transparency and predictability; capacity-building program; Electric Power and Other Energy; political risk; government conduct; investment promotion agency; investor-state dispute settlement; capacity-building activity; legal and regulatory framework; process of information sharing; changes in market condition; federal system of government; investment policy and promotion; due process of law; floating exchange rate regime; monitoring and evaluation method; agriculture, fishing, and forestry; breach of contract; number of jobs; amount of investment; law and regulation; political decision making; regulatory risk; balance of payment; Type of Investment; bilateral investment treaty; country fixed effect; number of investors; preferential trade agreement; legal & regulatory; political economy dynamic; abuse of authority; protection and security; investment response; international investment agreement; Rule of Law; trade and investment; use of land; social science research; credit default swap; global value chain; international arbitration proceedings; changes in regulation; degree of autonomy; abuse of discretion; measures of risk; trade in goods; notice of intent; political risk insurance; access to investors; water and electricity; international legal system; alternative to arbitration; still under implementation; cost of labor; types of service; laws and regulation; privatizing public university; source of funding; effective risk management; private sector actors; Political Economy Analysis; access to financing; perceptions of risk; civil society actor; natural resource endowment; costs of conflict; access to land; state dispute resolution; loss of job; low tax rate; political decision maker; global production network; natural resource sector; exchange of good; investment and development; civil society stakeholders; investment knowledge; interest of investor; direct foreign investment; international investment law; piece of legislation; types of contract; theory of change; value of investment; ex post survey; form of tax; act of violence; abuse of power; interpretation of law; public policy objective; road and transportation; risk of expropriation; information and communication; level of policy; standards of protection; means of investment; autonomous regulatory authorities; domestic investment climate; international debt crisis; ministries of finance; high political support; compensation for damage; agency model; electronic data exchange; international legal proceeding; political economy factor; learning by doing; market trade; global best practice; external third party; investment information; scope of application; exchange rate volatility; human resource issues; source of financing; natural resource exploitation; international legal authority; pattern of behavior; foreign investor; regulatory change; investment protection; empirical evidence; tax haven; legal dispute; convertibility restriction; aftercare service; international investor; empirical research; foreign affiliate; government action; political clout; host state; the administration; domestic law; survey data; tertiary sector; economic sector; Natural Resources; host economy; Fixed Assets; investor-state arbitration; capital expenditure; aftercare program; specialized agency; expansion plan; regulatory conduct; foreign exchange; internal fund; equitable treatment; risk index; institutional infrastructure; legal protection; Regulatory Bodies; domestic investor; legal analysis; empirical analysis; customs procedure; investment expansion; regulatory body; e-mail campaign; quota sampling; legal mandate; diagnostic phase; institutional framework; confidence interval; interest group; new investment; global economy; tracking system; political authority; investor protection; regulatory environment; investment incentive; positive impact; survey sample; arbitration award; marginal effect



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Echandi,Roberto Nimac,Ivan Anton Chun,Dongwook

Retention and Expansion of Foreign Direct Investment (Vol. 2) : Political Risk and Policy Responses (English). Washington, D.C. : World Bank Group.