Foreign Direct Investment in an Era of Increased Threats to Critical Infrastructures

The need to maintain national security while deriving the benefits of global economic liberalization presents a significant challenge for governments attempting to privatize critical infrastructure assets. In the post September 11, 2001 world, the notion that foreign direct investment positively contributes to an economy is being tempered by the realization that it can pose a threat to national security. This paper discusses the principal issues that governments must consider when authorizing foreign investment in critical infrastructures. The policies of the United States and Israel are compared to focus and clarify the challenges associated with using a national security rationale to constrain foreign investment.