Although it may seem surprising that foreign investment declines in developing countries as natural-resource extraction makes up a larger share of those countries’ economies, that decline happens because resource extraction requires initial investments too large for foreign investors to supply. 

Although developing countries tend to become less dependent on foreign investment as natural-resource industries make up a larger share of their economies, this change may not occur if the boom-bust cycle of those industries destabilizes local currencies or increases countries’ vulnerability to external shocks. 

Although one might expect that foreign investment would increase as natural-resource extraction makes up a larger share of developing countries’ economies, the opposite happens because heavy reliance on natural resources can lead to unattractive conditions for investors.  

Although foreign investors tend to avoid initial investments in natural-resource industries in developing countries, foreign investment may increase significantly as those industries stabilize and the risks associated with them decline.