WWS 594d
Promoting Foreign Investment in Developing Countries
Spring Semester 2011, Session II
Wednesdays, 1-4:00 pm
Robertson 015
Visiting Professor: Joshua Bolten
Robertson 305, x8-9663
jbolten@princeton.edu
Faculty Assistant: Bernadette Yeager
Robertson 423D, x8-4830
byeager@princeton.edu
Research Assistant: Yan Bennett
Bendheim 118, x8-1642
ybennett@princeton.edu
COURSE DESCRIPTION AND REQUIREMENTS
With the efficacy of foreign aid increasingly called into question and the appetite in
developed countries for spending on aid dwindling, much public policy attention is focusing
on promoting foreign investment as a path to growth in developing countries. This halfterm seminar first examines the link between foreign investment and development, then
reviews policies and practices designed to promote investment in least developed countries,
especially in Africa.
The first two weeks of the course provide an overview of the role of foreign investment in
development and of the economic context in Africa today. The following four weeks cover
specific policies designed to promote foreign investment. In each of those weeks, there will
be two sets of two-student presentations reviewing and analyzing a specific policy area.
In addition to a class presentation, each student will prepare a final paper, limited to 4,000
words, analyzing and making recommendations on proposals in the area of their
presentation. (Students may choose to write on an area different from the one assigned for
class presentation, but will need the professor’s approval.)
Grading will be weighted as follows:
-- Class presentation
25%
-- Other class participation
25%
-- Final paper
50%
CLASS SCHEDULE, TOPICS, AND ASSIGNMENTS
Class #1 (March 23): Promoting Growth in an Era of Diminished Aid
Topics: Overview. The moral, economic, and security rationales for promoting
development. The relative merits of aid vs investment. What works, where and why?
Readings:
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World Bank, Globalization, Growth and Poverty – Building an Inclusive World
Economy (2002) (Overview pp 1 – 18)
http://web.worldbank.org/WBSITE/EXTERNAL/EXTDEC/EXTRESEARCH/EXTPRRS/0,,c
ontentMDK:22310205~pagePK:478097~piPK:477636~theSitePK:477633~isCURL:Y,
00.html
The Growth Report: Strategies for Sustained Development and Inclusive Growth
(2010) (Overview: pp 1-12; Africa: pp 71-77)
http://www.growthcommission.org/index.php?Itemid=169&id=96&option=com_cont
ent&task=view
Dani Rodrik, Diagnostics Before Prescription (2009)
http://www.hks.harvard.edu/fs/drodrik/Research%20papers/Diagnostics%20before
%20prescription.pdf
Jeffrey Sachs, The End of Poverty (2005) (Chpt 14: Global Compact to End Poverty)
Dambisa Moyo, Dead Aid (2009) (Foreword and Chpt 4: The Silent Killer of Growth)
Ted Moran, Does Foreign Direct Investment Promote Development? (2005)
http://www.social-sciences-andhumanities.com/PDF/White_House_and_the_World.pdf#page=134
Rod Hunter, “Into Africa,” Weekly Standard (2009)
http://www.hudson.org/index.cfm?fuseaction=publication_details&id=6393
Class #2 (March 30): The Economic Context in Africa Today
Topics: Growth trends in Africa. Aid vs investment inflows. Why has Asia developed
while Africa lags? Manufacturing vs extractives.
Readings:
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Africa Trade Policy Center, Dupasquier and Osakwe, FDI in Africa: Performances,
Challenges and Responsibilities (2005)
http://www.uneca.org/atpc/Work%20in%20progress/21.pdf
African Center for Economic Transformation, Strategic Lessons for Africa’s Economic
Transformation (2009)
http://acetforafrica.org/site/wpcontent/uploads/2009/10/working_paper_1_overview.pdf
McKinsey Global Institute, Lions on the Move (2010) (Exec Summary)
http://www.mckinsey.com/mgi/publications/progress_and_potential_of_african_econ
omies/pdfs/MGI_african_economies_ExecSumm.pdf
McKinsey, Podcast of Lions on the Move (19 minutes);
http://www.mckinsey.com/mgi/publications/assets/progress_and_potential_of_africa
n_economies/index.asp
Ethan Kapstein, “Africa’s Capitalist Revolution,” Foreign Affairs (2009)
Ramachandran, Africa's Private Sector: What's Wrong with the Business Environment
and What to Do About It (2009) (Summary and Chpt 2)
http://www.cgdev.org/content/publications/detail/1421340
Class #3 (April 6): Trade & Investment: the International Legal Framework
Readings:
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USAID, Trade and Investment: A Policy Overview
http://www.eldis.org/vfile/upload/1/document/0708/DOC9844.pdf
William Cline, Trade and Global Poverty (2004) (pp ___)
http://www.cgdev.org/content/publications/detail/2908
Globe and Mail (http://www.theglobeandmail.com/report-on-business/industrynews/energy-and-resources/ontarios-green-policy-questioned-in-eu-tradetalks/article1762603/)
Ted Moran, Harnessing Foreign Direct Investment: Policies for Developed and
Developing Economies (2010) (Chpts 1-2)
Dan Price, “Keep International Protections,” Washington Times (2009)
http://www.ofii.org/docs/Price_Article_05092009.pdf
Student presentations:
1. Free Trade Areas and the WTO. What role for trade agreements in promoting
foreign investment and growth generally? What more is possible in trade policy
today?
2. Bilateral Investment Treaties; local content, tech transfer, and other investment
requirements and protections. Are BIT’s sound policy? Effective in promoting
investment?
Class #4 (April 13): Underwriting Private Investment – Roles for Government
Readings:
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World Bank, Making Finance Work for Africa (2006) (chapters 1 and 3)
http://siteresources.worldbank.org/INTAFRSUMAFTPS/Resources/MFWfAFinalNov2.p
df
Ted Moran, Harnessing Foreign Direct Investment: Policies for Developed and
Developing Economies, (2010) (Chapter 5)
Ramachandran, Africa's Private Sector: What's Wrong with the Business Environment
and What to Do About It (2009)
(http://www.cgdev.org/content/publications/detail/1421340)
Gordon Redding, The Future of Chinese Capitalism: Choices and Chances (2008)
(Overview)
Student Presentations:
3. Multilateral Development Banks (World Bank, AfDB, et al). What are they doing to
promote private investment? Can policies be improved?
4. USG investment and trade promotion agencies (OPIC, ExIm, et al). Who does
what? Should and can they be made more effective? Should the US have its own
development bank?
Class #5 (April 20): Encouraging Investment through Sound Domestic Policies:
Good Governance and the Rule of Law
Readings:
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Douglass North, Nobel Prize Lecture: Economic Performance Through Time (1993)
http://nobelprize.org/nobel_prizes/economics/laureates/1993/north-lecture.html
Ted Moran, Promoting Universal Transparency in Extractives: How and Why (2011)
http://www.cgdev.org/content/publications/detail/1424865
John Heilbrunn, Anti-Corruption Commissions – Panacea or Real Medicine to Fight
Corruption? (2004)
http://siteresources.worldbank.org/WBI/Resources/wbi37234Heilbrunn.pdf
Rodrik, Dani, Arvind Subramanian and Francesco Trebbi (2002). “Institutions Rule:
The Primacy of Institutions over Geography and Integration in Economic
Development,” NBER Working Paper No. 9305
Transcript from White House Summit on International Development: Panel on Good
Governance
http://georgewbushwhitehouse.archives.gov/infocus/internationaldevelopment/trans-ids-5.html
Doug Johnson, Tristan Zajonc, Can Foreign Aid Create an Incentive for Good
Governance? Evidence from the Millennium Challenge Corporation (2006)
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=896293
Student Presentations:
5. Millennium Challenge Corporation. Is incenting better domestic policies working?
How to improve?
6. Corruption. The FCPA and foreign analogs; Cardin-Lugar and extractives
transparency; the Ibrahim Index and Prize. Are anti-corruption and transparency
initiatives useful and effective in promoting investment?
Class #6 (April 27): Creative Capitalism: New Financial Tools for Development
Readings:
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John Simon and Barmeier, More Than Money (2010) (pp 1-30)
http://www.cgdev.org/content/publications/detail/1424593
Social Finance, Toward a new social economy: Blended value creation through Social
Impact Bonds (March 2010)
http://www.socialfinance.org.uk/sites/default/files/Towards_A_New_Social_Economy
_web.pdf
Insight at Pacific Community Ventures & the Initiative for Responsible Investing,
Impact Investment: A Framework for Policy Design and Analysis (Executive
Summary, pp 7-30)
http://www.rockefellerfoundation.org/news/publications/impact-investingframework-policy
Ngozi Okonjo-Iweala: Homeward Bond
http://www.cp-africa.com/2011/03/15/homeward-bond-ngozi-okonjo-iweala-dilipratha-write-diaspora-bonds-2/
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Affinity Macrofinance and R4D, Tapping into $1.1 trillion of Domestic Development
Aid Funding (2010)
(http://www.resultsfordevelopment.org/sites/resultsfordevelopment.org/files/resourc
es/Pension%20Fund%20Article.pdf)
Student presentations:
7. Bond markets and innovative instruments. What exists in Africa, what can, and
why it matters. Social development bonds and diaspora bonds.
8. Impact Investing. What is it? Does it help? How to promote?
Rev 3/16/11