Economic growth required for the eradication of poverty and the achievement of the other associated MDGs depends on capital accumulation (investment) and technical change going hand in hand. Foreign direct investment (FDI) in particular is an important driver of industrial performance, as it is expected to improve industrial productivity growth directly by infusing new capital, technologies and managerial know-how, and by improving the average skills and efficiency levels of industry.
An important factor, inter alia, which would influence the success of FDI promotion efforts, is the availability of qualified local entrepreneurs/investors backing the investment projects. However, finding qualified and capable local investors, and matching the expectations of foreign investors, still remains a grave problem in many developing countries. A credible local investor base will emerge only if the private sector is induced to engage in productive activities by encouraging domestic investments.
Therefore, in order to attain growth, developing countries and those with economies in transition need to mobilize investment – both domestic and foreign – as well as modern technologies, so as to expand their productive assets.