Attracting Foreign Direct Investment in Developing Countries: Determinants and Policies-A Comparative Study between Mozambique and China

Abstract

Attraction of foreign direct investments has been deserving attention for many governments worldwide. Using different literature about Foreign Direct Investment, this paper analyzes the determinants and policies to attract foreign direct investments to developing countries and makes a comparative study between Mozambique and China. The results found, indicate the difference among countries in attracting investments due to their different geographic location, conditions of infrastructure (poor or developed), corruption, taxes as well as the implementation of the policies by the governments. These results also show that successful policies in China should not be copied or implemented by Mozambique. Foreign Direct Investment must only be allowed to operate according to local conditions and must conform to certain performance requirements that will ensure a positive impact on development. Evidence within this paper shows that Africa is different in attracting FDI due to the lack of high return on capital and infrastructure development, and openness to trade.