Tweet

HUMAN RESOURCE DEVELOPMENT AND ATTRACTING INWARD FDI

Written by: OECD Development Centre

Article Overview: One of the characteristics of rich industrial economies is the availability of a workforce with a high level of human capital. Whether human capital has been the key driver of economic prosperity or vice-versa is still a matter of debate. Nevertheless, long time series trends in educational attainment and economic growth during the last century indicate that HRD and economic prosperity went hand in hand10. Some developing countries followed similar trends in human capital and economic growth. What was distinctive about these developing countries is that they appeared to have realised large economic benefits in attracting MNEs into host economies, and have thus mobilised inward FDI to attain rapid economic growth.

HUMAN RESOURCE DEVELOPMENT AND ATTRACTING INWARD FDI

One of the characteristics of rich industrial economies is the availability of a
workforce with a high level of human capital. Whether human capital has been the key
driver of economic prosperity or vice-versa is still a matter of debate. Nevertheless, long
time series trends in educational attainment and economic growth during the last century
indicate that HRD and economic prosperity went hand in hand10. Some developing
countries followed similar trends in human capital and economic growth. What was
distinctive about these developing countries is that they appeared to have realised large
economic benefits in attracting MNEs into host economies, and have thus mobilised
inward FDI to attain rapid economic growth.
How do host developing countries attract FDI? Figure I.1 indicates the importance
of an attractive investment climate and sound policy environment in order for host
developing countries to successfully attract FDI. Investment climate includes
availability/quality of factors of production, market size/access, logistic costs and
numerous socio-political environments conducive for doing business with minimal risk.
Past experiences of countries that have successfully attracted FDI indicate that many of
these factors were indispensable. Among these, the level of human capital has been a
crucial factor that MNEs, especially the high value-added MNEs, were seeking when
determining the new location of operation. This has recently become even more crucial
as the mode of MNE production is becoming relatively skill-biased with an increasing
number of high-technology manufacturing and services MNEs seeking labour force
equipped with knowledge in engineering, technology, organisational skills and business
administration.
This section evaluates host developing country efforts to develop human capital to
attract inward FDI. The aim is to determine the following:
— Is human capital essential for attracting any type of FDI?
— What are the level and type of human capital necessary to attract FDI?
Both questions have become increasingly important but at the same time difficult
to tackle since the type and the mode of FDI have changed dramatically during the past
two decades and host countries are striving to upgrade/adapt their human capital as well
as other key host country environments. The following evaluates empirical evidence on
the role of HRD on inward FDI, and assesses policy experiences to mobilise HRD.

OECD DEVELOPMENT CENTRE
Working Paper No. 211
HUMAN CAPITAL FORMATION
AND FOREIGN DIRECT INVESTMENT
IN DEVELOPING COUNTRIES
by
Koji Miyamoto

Related Articles
  Summary: HUMAN CAPITAL FORMATION AND FOREIGN DIRECT INVESTMENT IN DEVELOPING COUNTRIES
  Preface: HUMAN CAPITAL FORMATION AND FOREIGN DIRECT INVESTMENT IN DEVELOPING COUNTRIES
  Human Resources Software
  Human Resource Management
  2.0 Recent Economic Performance in Africa and Prospects for 2007: Economic Report on Africa 2007

Article Tags: attractive investment, developing country, economic benefits, economic prosperity, educational attainment, engineering technology, factors of production, fdi, high technology, industrial economies, investment climate, labour force, logistic costs, mnes, new location, policy environment, political environments, rapid economic growth, series trends, time series



Related Forum Posts


Share this article with your friends. Fund someone's dream.

Leave a comment below or share on the left and you'll help support entrepreneurs in Africa through our partnership with Kiva. Over $50,000 raised and counting - Please keep sharing! Learn more.

Tweet

Newsletter

Get advice & tips from famous business
owners, new articles by entrepreneur
experts, my latest website updates, &
special sneak peaks at what's to come!

Name:
Email:

Popular Articles

When the Going Gets Tough, the Tough Log On

Ten Things You Can Do To Be a Better Leader

Five Ways to Show Honest Appreciation

Suggestions

Email us your ideas on how to make our
website more valuable! Thank you Sharon
from Toronto Salsa Lessons / Classes for
your suggestions to make the newsletter
look like the website and profile younger
entrepreneurs like Jennifer Lopez.