Portfolio investment in developing countries

The International Economics Department of the World Bank organized a conference on Portfolio Investment in Develop ing Countries on September 9-10, 1993 in Washington D.C. as part of a larger effort within the Bank to examine alternative forms of external financing to developing coun tries. Participants consisted of policy makers, investors, academics, investment bankers, national regulators, and officials of multilateral agencies involved in the monitoring and reporting of portfolio flow data, among others. The papers presented and discussed at the conference addressed trends associated with the rapid increase in portfolio flows to developing countries, the benefits of investing in emerging markets, barriers to such investments, and the issues de veloping countries must face in this regard. Many of these issues discussed were as yet unexplored, in part due to the lack of complete data on portfolio investment flows to devel oping countries. This document provides the papers that were presented at this conference, along with their respective discussants' comments.

This document begins with an overview chapter that provides a summary of the key findings that emerged from the conference. The remainder of the document is divided into four sections. The first section includes the papers that focus on the magnitudes and prospects of these portfolio flows and introduces the policy issues that arise. The second section provides the papers that examine the benefits associated with these flows for both investors and develop ing countries. The third includes papers that address the concerns for developing countries, focusing on the issue of barriers to portfolio flows and security design. Finally, the policy implications for developing countries are con sidered in the papers provided in the last section of this document.

Many questions remain and a long research agenda is still ahead. But, this conference provided useful input on the burning issues facing policymakers in developing coun tries, both those that are contemplating to use the inter national capital markets more extensively in order to meet their external financing needs as well as those currently dealing with unprecedented large portfolio inflows from abroad.