Foreign Direct Investment and Investment Climate

The changing direction of foreign direct investment (FDI) from developed countries towards developing ones, especially after the crisis, has started to attract more attention in the literature. In this paper, the link between FDI and “ease of doing business” indicators, as one possible source of the changing direction of FDI, is investigated. The data source is the World Bank's Doing Business Database. The study covers the years from 2004 to 2010. Because the paper includes the years right before the economic and financial global crisis, as well as the crisis period, the impact of changing “ease of doing business” on the changing direction of FDI towards developing countries can be better evaluated. The initial results show that countries which have better records of “doing business” tend to attract more FDI. The improvement in “ease of doing business” indicators in developing countries can have a partial explanatory power in determining higher FDI flows to these countries.