Investment Consequences of Information Hurdles in Smaller Developing Countries

This short essay, which appeared in a Lithuanian law review, analyzes how consequences of information policies in smaller developing countries relate to their success or failure in attracting foreign investment capital. The central purpose of this work is to encourage government officials, private lawyers, and businesspeople to consider their actions from the standpoint of the information marketplace. For each proposed action, two questions should be asked. First, those in authority should ask whether the action would make it less expensive and more convenient for parties outside such small developing countries to learn about the domestic marketplace. Second, they should ask whether the proposed action would make it more or less easy for local citizens to understand what is happening in their government and society. The consequence of information cost effects on incoming investment are profound for small nations seeking to attract foreign capital for continued development and economic growth, especially where such countries have unfamiliar languages, relatively few citizens or descendants abroad with ongoing links to the country, and no unique natural resources to draw inbound investment. In such circumstances, the signaling effect of information policy can be crucial to success in attracting foreign investment