This background paper for the World Economic and Social Survey for 2006 provides background information about macro trends in FDI and how trends have differed by region and country. It also discusses the evolution of determinants of FDI, from tariff jumping FDI and outright barriers to FDI towards economic fundamentals such as human resources and infrastructure. It looks at the main impact areas and how most governments are increasingly regarding FDI as beneficial and have begun to realise that effective FDI policies can help to maximise the benefits from minimise the costs of FDI. The paper confirms the overall trend towards FDI policy liberalisation with an overview of FDI policy developments.