world bank the effectiveness of promotion agencies at attracting foreign direct investment phần 4

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The Business Environment

Matters

T

he positive association of promotion efforts on investment

masks large differences across countries. So far, we have

ignored the environment in which the IPA operates. The envi￾ronment varies considerably across the countries included in

our sample, from Ethiopia to Singapore, China to Ireland,

Senegal, and the Dominican Republic. We find that that the

quality of investment climate and the level of development

strongly influence the IPA’s effectiveness. This finding has

important policy implications.

The Role of the Country’s Environment

One might expect that investment promotion is more effective in

a good rather than a poor policy environment. It is easier to con￾vince potential investors to come to an attractive country. The

agency has to convey the right information to potential investors

and thus acts as a facilitator or intermediary in this process.

However, in such a context, it could be argued that the agency

is redundant. Most investors are well aware of opportunities in