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Abstract
The 1990s have witnessed a dramatic revival and expansion in capital flows to developing countries and significant changes in the composition of these flows. Many Asian countries, building on their strong economic performances of the latter half of the 1980s, attracted increasing levels of inflows. Major countries in the Western Hemisphere experienced a reversal of previous outflows of flight capital and renewed access to international capital markets, as debt problems of the 1980s were resolved and strong economic adjustment programs and structural reforms created opportunities and suitable climates for investment and growth. At the same time, the external environment for developing country financing improved, with the slowdown in economic activity in the industrial countries and regulatory changes that facilitated developing country access to capital markets. Foreign direct investment flows surged, accounting for a large part of the increase in inflows to developing countries, particularly those in Asia.
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