Developing Comprehensive General and Sector-Based Indicators for Assessing the Contribution of Foreign Direct Investment to Sustainable Development

Foreign direct investment (FDI) can contribute to the sustainable development of home and host countries through creating jobs, generating economic growth and development, helping to alleviate poverty eradication, improving access to energy, infrastructure, health and environment. While FDI can generate significant positive development results, this outcome is not the primary objective of the private multinational enterprises (MNEs) that control the vast majority of FDI flows.  These enterprises seek strategic investments that will increase their global competitiveness and profitability. Governments should therefore prioritize attracting investment projects from MNEs that maximizes the positive and minimizes the negative developmental impacts of the investment. Quality, sustainable FDI will indeed be even more critical to helping countries recover and build back better in the COVID-19 recovery period. However, to attract and approve sustainable FDI projects, countries must have tools to evaluate the sustainability inward FDI projects and the extent to which they are aligned with the sustainable development priorities of that country. This paper provides those specific tools to policymakers: it provides a framework for developing weighted country-specific general and sector specific indicators to evaluate FDI projects. Policymakers can use the framework indicators conceptually introduced in this paper to develop tailored investment sustainability indicators to assess FDI against national development priorities and plans.