Until the 1970s, FDI was generally thought to be detrimental to the growth of capital-exporting countries: MNEs were viewed as depriving the local capital pool of additional growth and employment by investing abroad. As a result, many countries had measures such as foreign exchange controls. Even today, there are occasional demands for the introduction of "runaway plant" legislation to restrict the exporting of jobs.9 Recent American public pressure to prevent U.S. companies investing outside the country, thereby "destroying" U.S. jobs, is a case in point. This type of pressure arises in response to growing unemployment or to the uncertainty created, for example, by the "jobless recovery" in the United States.
Nevertheless, outward foreign direct investment confers significant long-term benefits:
• A capital-exporting country receives benefits in the form of repatriated profits, intellectual property royalties and similar payments.
• Outward FDI tends to increase international trade, especially exports of machinery, other capital goods and specialized services. A study by the Organisation for Economic Co-operation and Development (OECD) found that each $1 of outward FDI was associated with $2 of additional exports.10
• By investing abroad, MNEs gain access to overseas markets, resources and opportunities to exploit their competitive advantages to the fullest.
Consequently, most developed countries actively promote outward FDI by providing information and technical assistance, risk insurance or guarantees, and loans to MNEs.