Foreign Investment and Supply Chains in Emerging Markets: Recurring Problems and Demonstrated Solutions

Working Paper
14-12
December 2014

Multinational corporations account for 80 percent of all transfers of goods and services across borders, either within their own affiliate transactions or through networks with independent providers. As a result, the term "supply chains" is rapidly becoming the new norm in discussing the spread of trade and investment around the globe. However, important market failures and tricky obstacles inhibit creation of supply chains in emerging markets. Moran identifies the most important market failures and impediments that hinder the spread of supply chains in developing economies and examines how some host governments have been successful in overcoming these obstacles. The evidence shows that developing country authorities should create effective investment promotion agencies and fund industrial parks, reliable infrastructure, and vocational training to attract foreign direct investment and diversify and upgrade their production and export base.