Foreign Direct Investment and Economic Security of Developing Countries

Author: Cui Jian
Publisher:
Publish Date: 2004-11-01
Features: National economic security primarily refers to the protection of a country's fundamental economic interests. Developing countries attract and utilize foreign direct investment to better promote their own economic development, but in the process, they also incur certain costs and may even to varying degrees harm their fundamental economic interests. From the perspective of institutional economics, institutional disequilibrium is the root cause of national economic insecurity, and foreign direct investment can exacerbate institutional disequilibrium. The specific impacts of foreign direct investment on the economic security of developing countries are highly complex. From macro, meso, and micro perspectives, it can be found that foreign direct investment has a significant impact on the security of the national economic structure and industrial security of developing countries. Both theoretical and empirical analyses show that foreign direct investment has both positive and negative effects on the economic security of developing countries. Therefore, to safeguard national economic security, developing countries should neither outright reject foreign direct investment nor rely on it excessively, but instead adopt a "self-reliant" development model. The role of the government in ensuring national economic security is fundamentally a form of institutional innovation and institutional supply, with the government being the ultimate subject responsible for safeguarding national economic security. The strength of a developing country's government's capacity for institutional innovation and supply becomes the key to ensuring national economic security. Due to differences in the status and roles of governments, the actual effectiveness of developing countries in handling the relationship between utilizing foreign direct investment and safeguarding national economic security varies significantly, a phenomenon particularly evident in emerging industrialized countries in Asia and Latin America. To fundamentally address the issue of utilizing foreign direct investment by foreign entities while safeguarding national economic security, China must start with institutional construction, enhance the government's capacity for institutional supply, and build a system of national economic security institutions.