Promoting Export–Oriented Foreign Direct Investment in Developing Countries: Tax and Customs Issues

There has been a growing emphasis in many developing countries to adopt an exported growth policy that attempts to attract both domestic and foreign investment into activities that will increase exports. Many countries, however, have not achieved the desired response. Among other problems, investors often face foreign exchange controls tariffs on imported inputs, and a costly system for the exemption or refund of sales taxes on inputs used to produce exports. These factors have frequently impeded the inflow of foreign investment and prevented the expansion of export production and sales. This paper addresses two issues related to the design and administration of some of the fiscal provisions that affect the competitiveness of a country in the production of non-rational exports.