Diaspora direct investment (DDI) : the untapped resource for development

This alternative, Diaspora Direct Investment (DDI), might serve to alleviate the downturn in investment from G-8 and traditional private sources. DDI is distinct from FDI in that it relies on a transnational social network made up of migrants and migrant mechanisms operating between host and home countries. The migrants are the linchpin because they have a unique knowledge of their homeland and culture. These factors make the migrants a more viable facilitator of capital acquisition and investment. Part One of this paper considers the traditional FDI approach and its shortcomings in development particularly in Africa. Part Two introduces the concepts and ideas that form the foundation of the DDI model. Part Three discusses the roles that DDI may play in improving economic growth in developing societies. Part Four provides several regional examples of DDI activity and its varying degrees of success. DDI is presented as a tool in that it can adjust to national economic and political contexts more flexibly than FDI. Part Five concludes by offering some suggestions for policymakers. Specifically, we suggest reforms for developing country-governments that would accommodate DDI allowing International Financial Institutions (IFIs) to increase capital flows into developing regions. (Author abstract)