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Some underdeveloped countries are so poor that the and development. y cannot generate sufficient savings for domestic investment All else equal, why might inadequate investment in underdeveloped countries naturally atract savings from developed countries?
What policie s might governments of underdeveloped countries put in place to enhance their attractiveness?
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Answer #1

1.

Inadequate investment in underdeveloped country will have demand for funds that will be more than the supply of funds.it will cause increase in interest rates on the funds. due to higher interest rate on funds available in the country, savings will start flowing to earn higher interest income. It will make investors from outside the country to enter and supply loanable funds as well.

2.

Government should implement following policies to increase attractiveness.

A. bring financial reforms and develop regulatory framework

B. Bring strong law and order, stability and safe investment climate in the economy

C. Provide incentives to the investors with favourable treatment

D. Make policy to do business with ease

E. Commitment to invest in development programmes such as infrastructure to fuel the economy.

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