Suppliers to multinationals Book

Foreign direct investment in developing countries has increased dramatically in the last ten years. As a result many developing countries have begun to search for ways to increase the benefits from such investment. One of the ways is through increased backward linkages between foreign controlled companies and local firms. In the process, many countries have recognized that protectionist policies and local content programs previously used to force foreign companies to buy local inputs do not work well in the changed international environment. This study examines and compares the recent experiences of a number of developing countries in encouraging backward linkages. It argues that: 1) economic liberalization helps rather than hurts domestic suppliers, including small and medium enterprises; 2) institutional support focusing on upgrading the capabilities of domestic suppliers is critical; and 3) promotional programs combining public and private resources can accelerate linkage development.