During the 1990s, the governments of South Asian countries acted as ‘facilitators’ to attract FDI. As a result, the inflow of FDI increased. However, to become an attractive FDI destination as China, Singapore, or Brazil, South Asia has to improve the local conditions of doing business. This book, based on research that blends theory, empirical evidence, and policy, asks and attempts to answer a few core questions relevant to FDI policy in South Asian countries: Which major reforms have succeeded? What are the factors that influence FDI inflows? What has been the impact of FDI on macroeconomic performance? Which policy priorities/reforms needed to boost FDI are pending? These questions and answers should interest policy makers, academics, and all those interested in FDI in the South Asian region and in India, Pakistan, Bangladesh, Sri Lanka and Pakistan.

Like many other developing countries, South Asian nations have been experiencing increased Foreign Direct Investment (FDI) inflows over the past decade as developing countries get a larger share of cross-border investments once sent to developed countries. Nonetheless, South Asia's FDI inflows remain the lowest relative to Gross Domestic Product (GDP) among developing country regions. Over the next 20 years, more than one million new workers will be entering the South Asian labor market each month as the region's youth bulge matures and seeks employment. To absorb these workers and provide higher living standards and reduce poverty, South Asian countries will have to rely on more than just public investment. This report looks into the historical patterns of FDI in South Asia, examines its sectoral composition, and evaluates current policies and policy options that may help create an environment for increasing FDI flows. The launching point for this study is the substantial empirical literature that suggests that FDI is associated with growth, development, and productivity enhancement. The goal of the study is modest in that it does not seek to estimate the size of FDI spillovers on productivity growth, or address whether governments should actively subsidize FDI inflows over domestic investment as a means to enhance growth, but rather to understand whether the level of FDI flows as a share of GDP, its sectoral composition, and intra-regional flows are comparable to other developing regions and, if not, what might be some of the impediments to these flows. While FDI flows have increased over the past decade to South Asia, particularly from developed countries to South Asian service sectors, it has lagged in other sectors and remains relatively low overall. Overall, positive changes have taken place over the past few decades, while restrictions on FDI differ substantially among countries in South Asia. India's progress on FDI promoting policies has accelerated in recent years to make FDI policies more transparent, predictable, and simpler. Many other countries have also taken steps to improve transparency in regulations and reassure investors about the security of their investments in the country. Finally, the paper examines the determinants of FDI growth in South Asia.

Foreign Direct Investment (FDI) flows started gaining traction in South Asia from the late 20th century onwards, when nations from the South Asian Association for Regional Cooperation (SAARC) began moving away from highly controlled regimes and adopting liberal and open economic policies.In the context of surplus labour and capital scarcity faced by South Asian countries such as India, Pakistan, Bangladesh and Sri Lanka, to varying degrees, the economic reform process has provided an opportunity to actively promote inward FDI flows, with the goal of providing the much-needed capital for the growth of this region. Several policy initiatives were undertaken to attract FDI and incentives were announced to fascinate investors, resulting in the inflow of FDI across the region.This book examines FDI inflows in SAARC nations in the light of regional policy changes in the 21st century. It investigates the relationship between trade and FDI in the region, and also provides insights into the ease of doing business in the SAARC region.

Foreign direct investment has been more influential than other types of resource flows in shaping economic growth in ASEAN countries. South Asian policymakers can also facilitate the infusion of foreign direct investment flows if they pursue policies and nondistortionary incentive systems similar to those of ASEAN countries.

Foreign direct investment has been of great importance in economic growth and global economic integration over the last decades. South East Asia has been part of this development, with rapidly increasing inflows of FDI. However, there are large variations over time and between countries in the region with respect to policies towards FDI, and in actual inflows of FDI. This chapter aims to examine the size of FDI in South East Asia and trends in it. The main determinants of FDI in Southeast Asia, and their effect on the host countries are also discussed and examined.