Global capital flows to developing countries increased significantly during the nineties. In view of the East Asian financial crisis and Latin American experience, which type of inflow is good for the host country?

1. The question discusses global capital flows to developing countries, especially in light of financial crises experienced in East Asia and Latin America during the nineties. 2. These crises highlighted the potential volatility and risks associated with certain types of capital inflows. 3. Commercial loans (A) and External Commercial Borrowings (ECBs) (D) are forms of debt that need to be repaid, often with interest rate or currency risks. 4. Foreign Portfolio Investment (FPI) (C) involves investment in financial assets like stocks and bonds. While beneficial, FPI is often considered 'hot money' because it can be withdrawn quickly during times of crisis, leading to instability. 5. Foreign Direct Investment (FDI) (B) involves investment in establishing or acquiring substantial control over enterprises (e.g., building factories, acquiring companies). FDI is generally considered more stable and beneficial for the host country as it represents a long-term commitment, often brings technology transfer, management expertise, and creates jobs. It is less prone to sudden reversals compared to portfolio flows or short-term loans. 6. Therefore, FDI is widely regarded as the most desirable type of inflow for sustainable development.