The data on foreign investor behavior in the Moroccan investigation cover
four years, 1985 through 1989. During this period new inflows of FDI that
might be structured to take advantage of the permission to allow majority
ownership were quite limited, raising the foreign share of manufacturing
assets by 2 percentage points, from 13 percent in 1985 to 15 percent in 1989.
Changes in the share of foreign ownership by sector were also small: 5 percentage
points in leather, 4 percentage points in scientific instruments, and
3 percentage points in machinery, textiles, and apparel. Only in chemicals
(phosphates) was there a substantial FDI inflow, with the foreign share rising
by 7 percentage points. By far the bulk of the FDI stock had been established
to respond to the earlier minority foreign ownership IS regime. With
the given data, it is impossible to know how much reorientation—if any—
occurred among firms whose operations had been set up prior to 1985.
Controlling for firm size, Haddad and Harrison (1993) found that foreign
investors did not exhibit higher levels of labor productivity or greater outward
orientation for most sectors than their domestic counterparts. Firms
with foreign ownership demonstrated higher levels of total factor productivity
than their domestic counterparts, but the rate of productivity growth
was higher for the latter because—as Haddad and Harrison show—the
domestic firms were better prepared to cope with the distortionary effects of
protected markets.13 There was no significant relationship between higher
productivity growth in domestic firms and greater foreign presence in the
sector, suggesting that foreign investment did not bring positive spillovers
to the host economy. When Haddad and Harrison varied measures of relative
trade protection, technology spillovers from foreign investors to domestic
firms remained insignificant and generally negative.14 Overall, Haddad
and Harrison found that foreign investors did not make a large or dynamic
contribution to the development of the Moroccan economy.
Thus the Rodrik-led contention that a dollar of FDI is worth no more and
no less than a dollar of any other kind of investment rests on four years of
observing a host economy whose foreign investment base had been built as