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The political economy of development
This academic site promotes excellence in teaching and researching economics and development, and the advancing of describing, understanding, explaining and theorizing.
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On Planning for development: factor payments to abroad

Editor: Róbinson Rojas Sandford

Factor Payments from Abroad. Definition
Róbinson Rojas
Net Factor Payments from Abroad. All economies. 1960 to 1992
From United Nations WESP 2009:
Financing for development
Amidst the unfolding global financial crisis, developing countries continued to make increasing substantial net outward transfers of financial resources to developed countries, reaching an all-time high of $933 billion in 2008 (see figure III.1 and table III.1). After a moderation in the rate of increase in 2007, outward transfers increased more rapidly again in 2008. Net financial transfers are defined as net financial inflows less net factor and investment income payments to abroad which have become increasingly negative, implying resource flow out of developing economies. This trend has been continuing for over a decade.

Net resource flows from poor to rich countries
Private capital flows to developing countries
Foreign direct investment
International financial cooperation
Rehabilitating the global financial system
Governance reform at the Bretton Woods institutions


From the Federal Reserve Bank of Kansas City - 2006
Going Global: the changing pattern of U.S. investment abroad
By Marcella Mireille Aurélio

The New Economic Geography: effects and policy implications
A symposium sponsored by The Federal Reserve Bank of Kansas City
August 24-26, 2006

- Shift in economic geography and their causes
- Consequences for production and prices, employment and wages
- Consequences for financial markets and global savings and investment
- Strategies for growth - Implications for monetary policy - Overview panel
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From The Economist
On the hiking trail 
Globalisation is generating huge economic gains. That is no reason to ignore its costs
Aug 31st 2006
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Link to Integrated International Production
Link to "The Triad: European Union, U.S.A. and Japan)"
Global Development Finance 2004
Global Development Finance 2003
Global Development Finance 2002
State Administration of Taxation - 2002
People's Republic of China

Transfer Pricing Tax System and the development in China

"Statistics show that between 1988 and 1993, 35-40% of FIEs reported losses. Between 1994 and 1995, 50-60% reported loss. Between 1996 and 2000, 60-70% reported losses. It was true that some FIEs did lose money. Most others however were fake losers. They were avoiding tax by using schemes such as TP."
http://www.asiatoday.com.au/feature_reports.php?id=264


The interactions between China and the world economy
by Yu Yongding ( 2005), Director Institute of World Economics and Politics
Chinese Academy of Social Sciences

In 2003, the Chinese economy started to pick up strongly. For two consecutive years since then, China’s growth rate surpassed 9%, while inflation was under 5% cent and droping. China’s high growth contributed greatly to the global growth over the past two years. At the same time, the “China factor” has caused or worsened the shortage of some energy and raw materials, and drived many prices of energy and raw materials sky high. Faced with the rise of China, many people are worried about not only its current but also its long-run impact on the world economy. In this presentation, I will argue that China will be able to maintain a high growth rate for decades to go and China’s impact on the world economy will be sizable. But the impact should not be exaggurated. China’s current sharp increase in the demand for energy and minirial resources, to a large extent, is cyclica and will be tapering off fairly soon. China is fully aware of its international responsibility as a rising coountry. China will continue to enbrace globalization and abide by all international rules and norms. China will continue to make efforts to maintain and improve the international order, and actively participate in regional economic and financial cooperation.

Olena Havrylchyk, CEPII, Sandra Poncet, CES (University Paris 1, Panthéon-Sorbonne) and CEPII
2004
Foreign Direct Investment in China: Reward or Remedy?
In his book “Selling China” Huang (2003) states that a high level of foreign direct investment (FDI) in China is not necessarily a sign of strength, but can be partly attributed to the distortive nature of state policies that put restrictions on private and public enterprises. First of all, the Chinese financial system allocates resources to the least efficient firms – state-owned enterprises – while denying the same resources to Chinese private enterprises, forcing them to look for a foreign investor. Second, the inefficient system of state investment planning leads to mismanagement of public enterprises, increasing “insolvency induced FDI”. We propose to analyze determinants of FDI in Chinese provinces to test the above hypotheses. We control for traditional determinants of FDI such as market access, labor costs, productivity, infrastructure, reform advances and banking sector size in order to assess the impact of inter-provincial heterogeneity in terms of the access that private enterprises have to credit and the distortive management in state-owned firms.

Institute of World Economics and Politics
Chinese Academy of Social Sciences
China's road to prosperity

By Yu Yongding, 2004-8-27
Over the past two decades, China’s economy has registered an annual average growth rate of more than 9 percent. Now few foreign observers still have serious doubt about China’s economic achievement. However, a fundamental question remains unsolved. That is, will China’s economic growth sustainable? Will there be any major interruptions arise in China’s growth process. Some Chinese economists are even asking the question of whether China will eventually be Latin -Americanized? My view of China’s economic prosperity is one of cautiously optimistic. However, I would also like to emphaze that China’s road for modernation will be rather bumpy. If the Chinese government fails to solve many political, social and economic problems, China’s endeavor for modernization still may suffer important setback.

Chen Chunlai, 1997
Provincial characteristics and foreign direct investment location decision within China
Foreign direct investment (FDI) is one of the most dramatic features of China’s move from a planned economy toward a market economy. Since the passing in late 1979 of the Equity Joint Venture Law which granted legal status to FDI in Chinese territory, China has gradually liberalised its FDI regime, and an institutional framework has been developed to regulate and facilitate such investments. The liberalisation of the FDI regime and the improved investment environment have greatly increased the confidence of foreign investors in China. Consequently, FDI inflows into China increased rapidly after 1979, and particularly during the early 1990s. The total accumulated amount of FDI at current prices rose from the initial US$0.109 billion in 1979 to reach US$133.19 billion in 1995, at an annual growth rate of 55.93 percent...

Chen Chunlai, 1997
The location determinant of Foreign Direct Investment in developing countries
Since the late 1980s and especially in the early 1990s, China has received a huge amount of FDI in absolute terms. Its share both in the world total FDI inflows and in the total FDI inflows into developing countries has increased rapidly. As a result, since 1992 China has been the single largest host country among all developing countries, and further since 1993 China has become the second largest FDI recipient in the world (following the United States). China’s success in attracting FDI into its domestic economy in recent years has caused concern in many other developing countries that the huge amount of FDI inflows into China may represent a diversion of world FDI away from them.
However, China is large, and large countries normally receive a large amount of FDI inflows. Has China really received more FDI inflows from the world than it should have, based on its economic and geographical characteristics? To answer this question we have to investigate the location determinants affecting FDI inflows into developing countries and establish an empirical norm of the magnitude of aggregate FDI inflows...

Chen Chunlai, 1997
Comparison of investment behaviour of source countries in China
Since China launched the economic reforms and called for direct foreign capital participation in boosting its economic growth and upgrading its overall production technology, China has become one of the world most important countries to host foreign direct investment (FDI). On the one hand, FDI inflows into China increased rapidly after 1979, and particularly during the early 1990s. On the other hand, more than 100 countries have invested in China. As a result, since 1993 China has become the second largest FDI recipient in the world (following the United States) and the single largest host country among the developing countries (United Nations, 1995, p. 54). However, what is the composition of the source countries of FDI in China? Do the source countries differ in their investment behaviour? This paper will discuss and answer these questions...

UNCTAD
Development and Globalization: Facts and Figures 2004
Analyses supported by detailed statistical documentation. The report is aimed at a broad audience, including readers with little or no background in economics. It provides an overview of the evolution of developing countries in the context of globalization. It is a quick-reference tool for evaluating the growth prospects of developing countries. General topics covered include population and economic trends, external finance and debt, foreign direct investment, transnational corporations, international trade, production and trade of commodities and manufactures, and information and communication technologies (ICT). 119 pages.
UNCTAD
Foreign Direct Investment Statistics
From UNCTAD - October 2006
Need for more policy autonomy
10 October 2006 - At the final meeting of UNCTAD´s Mid-Term Review, developing countries called for more room for policy manoeuvre and a strengthening of the Aid for Trade initiative. Participants also said the trade negotiations should be more development focused. UNCTAD´s Mid-Term Review concluded today with member States agreeing that developing countries, in fashioning the individualized plans that will best enable them to expand their economies, have the right to strike a balance between development goals and the rules and commitments contained in international trade and financial agreements.

Foreign Direct Investment inflows to Africa hit historic high
UNCTAD/PRESS/PR/2006/028 - , 16/10/06
Also available in: French Spanish
Inward and outward FDI in West Asia hit record highs in 2005
UNCTAD/PRESS/PR/2006/032 - , 16/10/06
Also available in: French Spanish
Booming South-South investment creates development opportunities, says UNCTAD
UNCTAD/PRESS/PR/2006/027 - , 16/10/06
Also available in: French Spanish
Firms based in developing countries joining ranks of world's largest transnational corporations
, UNCTAD/PRESS/PR/2006/034 - , 16/10/06
Also available in: French Spanish
Gravity shifts to Asia in global FDI and R&D networks
, UNCTAD/PRESS/PR/2005/053 - , 15/11/05
Foreign direct investments rebounds in Latin America & The Caribbean
, UNCTAD/PRESS/PR/2005/037 - , 29/09/05
Also available in: French Spanish
Foreign direct investment in Africa remains buoyant, sustained by interest in natural rseources
, UNCTAD/PRESS/PR/2005/035 - , 29/09/05
Also available in: French Spanish
FDI rises for fourth year in a row in South-East Europe, Commonwealth of Independent States
, UNCTAD/PRESS/PR/2005/038 - , 29/09/05
Also available in: French Spanish
New  UNCTAD surveys: Foreign Direct Investment prospects promision for 2005-2008
, UNCTAD/PRESS/PR/2005/031 - , 05/09/05
Also available in: Spanish
Transnational corporations expected to increase dominance of clothing and textile sectors, says UNCTAD
, UNCTAD/PRESS/PR/2005/019 - , 13/06/05
Also available in: French Spanish
Firms in developing countries rapidly expanding foreign investment, transnational activities
, UNCTAD/PRESS/PR/2005/018 - , 30/05/05
Also available in: French Spanish
A decade of FDI liberalization: the evidence
, UNCTAD/PRESS/IN/2005/012 - , 16/03/05
Also available in: French
China is not crowding out FDI from the rest of East Asia, experts say
, UNCTAD/PRESS/IN/2005/007 - , 07/03/05
Also available in: French Spanish
New role for Japan's Sogo Shosha as they shift from manufacturing to services
, UNCTAD/PRESS/IN/2005/002 - , 20/01/05
Also available in: French
New Issue of Transnational Corporations Journal published
, UNCTAD/PRESS/IN/2005/001 - , 14/01/05
Also available in: French
World FDI flows grew an estimated 6% in 2004, ending downturn
, UNCTAD/PRESS/PR/2005/002 - , 11/01/05
Also available in: French
Towards centre stage: trade gains for the South can mean progress on Millenium Development Goals
, UNCTAD/PRESS/PR/2004/041/Corr.1 - , 20/12/04
Also available in: French Spanish
Africa: turnaround in FDI inflows last year
, UNCTAD/PRESS/PR/2004/024 - , 22/09/04
Also available in: French Spanish
Foreign Direct Investment: a rebound in the offing, led by FDI in developing countries and FDI in services
, UNCTAD/PRESS/PR/2004/022 - , 22/09/04
Also available in: French Spanish
FDI inflows to Latin America and the Caribbean: another disappointing yera
, UNCTAD/PRESS/PR/2004/026 - , 22/09/04
Also available in: French Spanish
FDI down in three Latin American economies
, UNCTAD/PRESS/EB/2004/007 - , 05/03/04
Also available in: French
Many African countries see declining FDI in 2002
, UNCTAD/PRESS/EB/2004/002 - , 20/01/04
Also available in: French Spanish
FDI plunges in Argentina, Venezuela
, UNCTAD/PRESS/EB/2003/09 - , 12/12/03
Also available in: French Spanish
FDI to Latin America and the Caribbean plummeted in 2002
, UNCTAD/PRESS/PR/2003/91 - , 04/09/03
Also available in: French Spanish
Africa not spared by global downturn in Foreign Direct Investment
, UNCTAD/PRESS/PR/2003/87 - , 04/09/03
Also available in: French Spanish
FDI flows to Italy climb, bucking downward global trend
, TAD/INF/B35/E - , 24/05/03
Also available in: French Spanish
FDI increasing to many Eastern European Countries
, TAD/INF/B32/E - , 27/03/03
Also available in: French Spanish
FDI, competitiveness and technology: what role for governments?
, TAD/INF/NC/49 - , 25/03/03
UNCTAD press releases

UNCTAD predicts 27% drop in FDI inflows this year, TAD/INF/PR/63 - , 24/10/02
Also available in: French
Category: Press information 2002

UNCTAD press releases

Dynamic products make for dynamic economies, TAD/INF/PR/61 - , 01/10/02
Also available in: French Spanish
Category: Press information 2002

UNCTAD press releases

US remains world's largest recipient of foreign direct investment, TAD/INF/PR/58 - , 17/09/02
Category: Press information 2002

UNCTAD press releases

Government and business leaders meet to increase investment in Africa, TAD/INF/PR/39 - , 20/03/02
Category: Press information 2002

UNCTAD press releases

FDI downturn in 2001 touches almost all regions, TAD/INF/PR/36 - , 21/01/02
Category: Press information 2002

UNCTAD press releases

Latin America's inflows down in 2000, TAD/INF/PR/28 - , 18/09/01
Also available in: Spanish
Category: Press information 2001

UNCTAD press releases

Meeting the competitive challenge: linking TNCs with local suppliers, TAD/INF/PR/22 - , 18/09/01
Also available in: French Spanish
Category: Press information 2001

UNCTAD press releases

Developed country FDI soars by 21%, TAD/INF/PR/27 - , 18/09/01
Also available in: French Spanish
Category: Press information 2001

UNCTAD press releases

FDI increases to the World's poorest countries, LDCIII/PRESS/01 - , 10/05/01
Category: Press information 2001

UNCTAD press releases

Partnerships for development: how can private sector enhance LDC's productive capacity?, TAD/INF/PR/01 - , 26/01/01
Also available in: French
Category: Press information 2001

UNCTAD press releases

FDI to Africa rises in 1999, but continent must become bigger market player, says UNCTAD report, TAD/INF/PR/057 - , 03/10/00
Also available in: French
Category: Press information 2000

UNCTAD press releases

Prospects brighten for foreign investment in Asia, TAD/INF/PR/058 - , 03/10/00
Also available in: French
Category: Press information 2000

UNCTAD press releases

Survival in global business arena is key driver of cross-border merger and acquisition boom, TAD/INF/PR/055 - , 03/10/00
Also available in: French Spanish
Category: Press information 2000

UNCTAD press releases

FDI in Latin America hits record levels, fuelled by long-term growth prospects, privatizations, TAD/INF/PR/060 - , 03/10/00
Category: Press information 2000

UNCTAD press releases

World’s largest transnational corporations cautiously optimistic about Africa's potential for attracting foreign direct investment, TAD/INF/PR/039 - , 15/02/00
Also available in: French
Category: Press information 2000

UNCTAD press releases

Foreign investment gains in Latin America. Brazil inflows rise sharply to record, TAD/INF/PR/9924 - , 23/09/99
Also available in: Spanish
Category: Press information 1999

UNCTAD press releases

Developed countries boost foreign direct investment by 46 per cent to new record, TAD/INF/PR/9926 - , 23/09/99
Also available in: French Spanish
Category: Press information 1999

UNCTAD press releases

Foreign Investment Flows into Central and Eastern European Countries Make Major Gains. Latvian Shipping Co. Leads New List of the Top 25 Transnational Corporations in Central Europe, TAD/INF/PR/9925 - , 23/09/99
Also available in: French
Category: Press information 1999

UNCTAD press releases

International production drives globalization, TAD/INF/PR/9920 - , 07/09/99
Also available in: French Spanish
Category: Press information 1999

UNCTAD press releases

Foreign Direct Investment by Transnational Corporations can produce major benefits, if the right government policies are in place, TAD/INF/PR/9919 - , 03/09/99
Also available in: French Spanish
Category: Press information 1999

UNCTAD press releases

Foreign Direct Investment into developing Asia has weathered the storm, TAD/INF/PR/9903 - , 27/04/99
Also available in: French
Category: Press information 1999

UNCTAD press releases

Educating policymakers on international investment issues, TAD/INF/PR/99008 - , 18/02/99
Also available in: French
Category: Press information 1999

UNCTAD press releases

Business works with UNCTAD to boost investment in Africa, TAD/INF/PR/99004 - , 19/01/99
Also available in: French
Category: Press information 1999

UNCTAD press releases

Foreign Direct Investment to Central and Eastern Europe Rises to US$19 billion in 1997, TAD/INF/PR/9842 - , 02/11/98
Also available in: French
Category: Press information 1998

UNCTAD press releases

Encouraging signs for Foreign Direct Investment into Africa, TAD/INF/PR/9844 - , 02/11/98
Also available in: French
Category: Press information 1998

UNCTAD press releases

Foreign Direct Investment on the rise, TAD/INF/PR/9824 - , 02/09/98
Also available in: French
Category: Press information 1998

UNCTAD press releases

World Investment Report 1997: FDI and competition policy, TAD/INF/PR/9715 - , 09/09/97
Also available in: French
Category: Press information 1997

UNCTAD press releases

Business globalization continues to boom, TAD/INF/PR/9714 - , 09/09/97
Also available in: French
Category: Press information 1997

UNCTAD press releases

Continued upswing of global FDI in 1996, TAD/INF/PR9711 - , 10/07/97
Also available in: French
Category: Press information 1997

UNCTAD press releases

Oil eclipsed? The rise of manufacturing and services FDI in West Asia, TAD/INF/PR/9707 - , 27/05/97
Also available in: French
Category: Press information 1997

UNCTAD press releases

Transnational Corporations: New Issue Released, TAD/INF/NC/96_39 - , 28/11/96
Category: Press information 1996

UNCTAD press releases

Need for a holistic approach to Foreign Direct Investment, TAD/INF/PR/9629 - , 11/10/96
Category: Press information 1996

UNCTAD press releases

Investment policies examined in a new issue of "Transnational Corporations" released today, TAD/INF/NC/96_22 - , 09/10/96
Category: Press information 1996

UNCTAD press releases

UNCTAD convenes a global investment forum, TAD/INF/PR/9625 - , 03/10/96
Category: Press information 1996

UNCTAD press releases

Report outlines ways to boost lagging European Union direct investment in Asia, TAD/INF/PR/9608 - , 19/03/96
Also available in: French
Category: Press information 1996

JETRO's annual surveys
JETRO publishes an annual White Paper on International Trade and Foreign Direct Investment (FDI). The paper includes JETRO's estimates for world trade and FDI figures, as well as in-depth analysis of the world economy?and Japan's place in it. Previous white papers have focused on such issues as intellectual property rights, the impact of FTAs, overseas operations of Japanese firms as well as the state of foreign direct investment in Japan. The paper is first published in Japanese and later translated into English.



WORLD INVESTMENT REPORT 2010
Investing in a low-carbon economy

There are some major changes in global FDI patterns that preceded the global crisis and that will most likely gain momentum in the short and medium term. Firstly, the relative weight of developing and transition economies as both destinations and sources of global FDI is expected to keep increasing. These economies, which absorbed almost half of FDI inflows in 2009, are leading the FDI recovery. Secondly, the recent further decline in manufacturing FDI, relative to that in the services and primary sectors, is unlikely to be reversed. Thirdly, in spite of its serious impact on FDI, the crisis has not halted the growing internationalization of production.
This year’s Report focuses on climate change, and in particular the role of transnational corporations. As enterprises with formidable knowledge, cutting-edge technology, and global reach, TNCs are necessarily among the primary actors in the global effort to reduce greenhouse gas emissions and shift towards a low-carbon economy. The Report stresses that with the right policy initiatives, incentives and regulatory framework, TNCs can and must contribute significantly to both mitigation and adaptation. It also proposes a global partnership to galvanize low-carbon investment and advocates concrete initiatives such as a new technical assistance centre to support policy formulation and implementation in developing countries.



WORLD INVESTMENT REPORT 2009
Transnational Corporations, Agricultural Production and Development

The Report covers, in particular, questions such as:
  • What are the differences between individual regions in terms of their responses in FDI flows to the crisis? Why did the crisis affect FDI to developing countries later than developed countries?
  • What are the prospects for FDI in 2009 as well as for the medium term?
  • How has the crisis affected national and international policies related to FDI? Has the path of more liberalizations been continued or reversed?
  • In the midst of a major industrial restructuring, which companies are the winners and losers in the universe of the world´s largest TNCs?
  • Why is agriculture such a special industry for developing countries - and what are its longer term prospects? What role can TNCs play in improving the productivity of agriculture in developing economies?
  • How robust is the renewed interest by TNCs in agriculture? Who are the new investors and how do they differ from traditional TNCs? What are the pros and cons of developing country farmers being drawn into global agribusiness value chains?
  • What can developing countries expect from the renewal of FDI in agriculture? Given the past record, will this time the impact of TNCs in agriculture be different?
  • How does TNC participation in agricuture affect socially sensitive issues, including those related to food security and the food crisis; as well as the non-food uses of agricultural produce for biofuels?
  • What policy challenges does TNC involvement in agriculture raise? How are they being addressed within the framework national economic strategies, with the aim of maximizing benefits and minimizing costs from TNC involvement?
  • Are policy makers sufficiently prepared to meet the challenges? How can the international community support them?

According to WIR09, after decades of slow growth, TNCs´ interest and participation in agriculture - including FDI - is again on the rise. Despite this rise, in most countries today only a small share of FDI goes to agriculture. There are nevertheless some developing countries, including least developed countries (LDCs), where the share of agriculture in inward FDI is relatively important. Renewed interest of foreign investors in agricultural investment is significant enough to raise questions about whether FDI and other forms of TNC participation in agriculture can contribute to the development of this long neglected industry. WIR09 suggests an integrated policy approach that takes into account all concerns arising from TNC involvement.



WORLD INVESTMENT REPORT 2008
Transnational corporations and the infrastructure challenge

Host countries need to consider when it is appropriate to draw TNCs into the development and management of infrastructure. They also need to find ways of ensuring that projects with TNC involvement lead to the expected development effects. This is a complex policy challenge.
As policy priorities and options vary between countries, so too does the optimal mix of public and private (including TNC) investment. Designing and implementing appropriate policies to harness the potential role of TNCs in infrastructure require adequate skills and capabilities. Governments need to prioritize among competing demands for different projects, establish clear and realistic objectives for the projects chosen, and integrate them into broader development strategies. This means that government agencies have to possess the necessary institutional capacity and skills to guide, negotiate, regulate and monitor the projects. This applies not only at the central level, but also in provincial and municipal governments.
While many developing countries seek foreign investment to develop their physical infrastructure, convincing foreign companies to invest has in many cases become even more challenging.




WORLD INVESTMENT REPORT 2007
Transnational Corporations, Extractive Industries and development

World Investment Report 2007 (WIR07) is the seventeenth in a series published by the United Nations Conference on Trade and Development (UNCTAD). The Report analyses the latest trends in foreign direct investment (FDI) and puts a special focus in 2007 on the role of transnational corporations (TNCs) in the extraction of oil, gas, and metal minerals.

Higher prices for many minerals have led to renewed investor interest in the extractive industries. TNCs  ( including some of the world´s largest corporations) play a key role in the mining of metals and in the extraction of oil and gas. Privately owned TNCs dominate the harvesting of metal minerals, while State-owned companies from developing and transition economies are key players in oil and gas. Many such State-owned firms are emerging as TNCs in their own right.

Drawing on unique data, the Report examines TNC involvement in the extraction of mineral resources and maps the key countries and companies. It also discusses how the forces driving investment change as raw materials progress up the "value chain" to become finished products, and as different types of companies participate. In view of recent discussion of the so-called "resource curse," the Report explores how the participation of TNCs may help or hinder long-term, broad-based economic development in developing countries -- the best approach for reducing poverty and raising living standards. It considers how energy and mineral extraction can help governments achieve such aims.


In addition to the general information on definitions and sources provided in this year´s World Investment Report, more detailed methodological notes for the data on FDI flows and stocks used in the Report - including how they were obtained for each economy - are available in electronic format only.

WORLD INVESTMENT REPORT 2006
FDI from Developing and Transition Economies: Implications for Development


This year´s World Investment Report focuses on the rise of foreign direct investment (FDI) by transnational corporations (TNCs) from developing and transition economies.
New sources of FDI are emerging among developing and transition economies. This phenomenon has been particularly marked in the past ten years, and a growing number of TNCs from these economies are emerging as major regional - or sometimes even global - players. The new links these TNCs are forging with the rest of the world will have far-reaching repercussions in shaping the global economic landscape of the coming decades.
The Report examines the magnitude of this phenomenon and examines its drivers and determinants, i.e.: what economic factors and policy developments lead firms from developing countries to venture abroad? For low-income countries, FDI from developing countries can be of great importance. In some of them, it accounts for a significant share of all FDI flows. The Report also discusses the development implications of the rise of these new sources of FDI, along with policy responses, for both home and host developing countries.
As in previous years, the Report also presents the latest data on FDI and traces the global and regional trends of FDI and international production by TNCs. Global FDI inflows rose substantially in 2005. A major contributing factor to this strong growth was the marked increase in the inflows to developed countries. Rising global demand for commodities was reflected in the steep increase in natural resource-related FDI, although the services sector continued to be the major recipient of FDI. Among developing regions, Asia remained the main magnet for FDI flows, followed by Latin America, where re-invested earnings have played a major role. Africa´s share in world FDI inflows was still small, but its FDI growth rate has nonetheless surpassed those of other developing regions.
A substantial Statistical Annex is also included, with data on FDI flows and stock for more than 200 economies. The PDF version of WIR05 and the Statistical Annex are available in a CD-ROM.
METHODOLOGICAL NOTES: Definitions and Sources. In addition to the general information on definitions and sources provided in this year´s World Investment Report, more detailed methodological notes for the data on FDI flows and stocks used in the Report - including how they were obtained for each economy - are available in electronic format only.

WORLD INVESTMENT REPORT 2005
Transnational Corporations and the Internationalization of R&D


World Investment Report 2005 (WIR05) presents the latest trends in foreign direct investment (FDI) and explores the internationalization of research and development by transnational corporations (TNCs) along with the development implications of this phenomenon.
Part One highlights recent global and regional trends in FDI and international production by TNCs. Global FDI flows resumed growth in 2004, but inflows continued to decline in developed countries. This Part documents the fact that developing regions are leading the recovery in FDI flows. It also documents different trends and patterns between developed and developing countries as regards the financing component of FDI (equity investment, reinvested earnings, intra-company loans) as well as the modes of investment (mergers and acquisitions, greenfield FDI).
Part Two assesses the implications of the recent surge in R&D internationalization by TNCs. R&D activities at growing levels of complexity are increasingly being established in selected developing countries. In contrast to past experience, this R&D often goes beyond local market adaptation and involves highly complex activities targeted on global markets. The Report discusses the driving forces behind this trend and considers how host as well as home countries are affected. Finally, the Report analyses the need for active government policies to enhance development benefits from TNCs´ internationalization of R&D. The Report underlines the importance of coherent policies in order to create an environment conducive to fruitful interaction between the R&D activities of TNCs and those of domestic firms and institutions. A final chapter outlines the role of international agreements in this area.
A substantial Statistical Annex is also included, with data on FDI flows and stock for more than 200 economies. The PDF version of WIR05 and the Statistical Annex are available in a CD-ROM.
METHODOLOGICAL NOTES: Definitions and Sources
In addition to the general information on definitions and sources provided in this year´s World Investment Report, more detailed methodological notes for the data on FDI flows and stocks used in the Report - including how they were obtained for each economy - are available in electronic format only.

WORLD INVESTMENT REPORT 2004
The Shift Towards Services


WIR04 presents the latest trends in foreign direct investment and explores the shift towards services, with a special analysis of offshoring service activities.
Part One discusses recent global and regional trends in FDI and international production by TNCs. Global FDI flows bottomed out in 2003, but there were some regional differences. The sectoral pattern of FDI is shifting towards services. Outward FDI from developing countries is becoming significant. There is also optimism that inflows to these countries will increase in 2004 and beyond.
Part Two deals with FDI in services - an important but often neglected area of FDI in the context of development. It examines the shift of FDI towards services with a focus on the entry of TNCs into new service areas. Services FDI, especially in intermediate and infrastructure services, affects the economic performance of a host-country in all sectors. The offshoring of corporate services is taking off rapidly, thanks to advances in information and communications technologies. However, the potential of such offshoring can only be harnessed if countries adopt appropriate policies.
Part Three analyses key issues relating to national and international policies on FDI in services. As many services are deeply embedded in the social, cultural and political fabric of host societies, the impact of FDI on those services could be far-reaching. Therefore, national policies matter - not only to attract FDI in services, but also to maximize its benefits and minimize its potential negative impacts. The proliferation of international investment agreements (IIAs) covering FDI in services has resulted in a multifaceted and multilayered network of international rules that affect national policy-making.
The WIR04 includes a substantial statistical annex, which is also available on CD-ROM.
Quick Links: | World Investment Directory Online |


WORLD INVESTMENT REPORT 2003
FDI Policies for Development: National and International Perspectives


The World Investment Report 2003 focuses on the foreign direct investment (FDI) downturn, its reasons and the role of national policies and international investment agreements (IIA) in attracting FDI to a country and for a country to benefit from it.
Part One discusses the overall trends in FDI. FDI flows have dropped drastically and no rebound is expected in 2003. The reasons for the downturn are discussed from a global perspective, as well as by region - developed countries, Africa, Asia and the Pacific, Latin America and the Caribbean, and Central and Eastern Europe.
Part Two focuses on key issues that straddle national FDI policies and international investment agreements with a view to bringing out the development dimension. Special attention is given to the rise of IIAs, the right to regulate, home country measures and corporate social responsibility.
The report includes a statistical annex of over 100 pages.
Quick Links: | Press Conference Opening Statements |

WORLD INVESTMENT REPORT 2002
Transnational Corporations and Export Competitiveness


The first principal finding is that foreign direct investment (FDI) inflows in 2001 declined to $735 billion. This is less than half the 2000 figure. Behind this decline is the slowdown in the world economy and a weakening of business confidence, both of which were accentuated by the September 11 events in the United States, and both of which contributed to a sharp reduction of cross border mergers and acquisitions that take place predominantly between industrialized countries. In light of the prolonged economic recession and the slow recovery of business confidence, especially in the United States, UNCTAD does not expect a rebound of FDI flows this year. Despite the decline in FDI flows, the expansion of international production continues, although at a slower pace. However, developments differ markedly between various parts of the world. The FDI downturn was concentrated in the developed countries (-59%), with only modest declines in flows to developing countries (-14%) and even a small increase in flows to Central and Eastern Europe (2%). There were also significant variations within the third world, with lower levels of inflows to Asia and Latin America but an increase to Africa. Africa, however, still remains a marginal recipient of FDI.


WORLD INVESTMENT REPORT 2001
Promoting linkages


The World Investment Report 2001 examines the issue of linkages between foreign affiliates of multinational enterprises and local companies in developing countries. Worldwide FDI flows again reached record levels in 2000. FDI remains the main driver of the expansion of the international production system. Forging linkages between foreign affiliates and domestic firms is a main challenge for policy-makers in developing countries in order to benefit from FDI as much as possible. WIR 2001 pays particular attention to this challenge. The objective is not to raise linkages at any cost, but to use them to upgrade the competitive capabilities of domestic enterprises. Fostering linkages is an important means of diffusing knowledge, information and skills from a foreign investor. In a technology and skill driven world, this can contribute to increasing the efficiency and growth potential of the host economy. WIR 2001 provides valuable information on country and company experience in this field.


WORLD INVESTMENT REPORT 2000
Cross-border Mergers and Acquisitions and Development



The contribution of foreign direct investment to development is now widely recognized.
There is a perception, however, that this contribution may be affected by the way investment enters a country. It may come in the form of a new enterprise or the expansion of an existing enterprise; it may also come through a merger or an acquisition. Acquisitions, in particular, arouse concerns, especially over employment, ownership and market structure. And the concerns become urgent when the host economy is a developing one.
Given the recent explosion in cross-border mergers and acquisitions, UNCTAD´s 10th World Investment Report is a highly timely and important document. This phenomenon calls for just the sort of careful and dispassionate analysis that has become the hallmark of the WIRs.
Cross-border mergers and acquisitions are a part of economic life in a liberalizing and globalizing world. But accepting a more open market in the interests of growth and development does not mean relaxing the requirements of public vigilance. On the contrary, a freer market - and particularly the emerging global market for enterprises - calls for greater vigilance as well as stronger and better governance. To this end, World Investment Report 2000 provides us with a valuable resource.
Kofi A. Annan
Secretary-General of the United Nations

WORLD INVESTMENT REPORT 1999
Foreign Direct Investment and the Challenge of Development


WIR 99 is the ninth Report in an annual series that has been recognized as the most up-to-date and comprehensive source of information as well as analysis regarding foreign direct investment (FDI).
Part I, entitled Trends,examines the most recent global and regional trends in FDI. It describes the world´s 100 largest TNCs, the 50 largest TNCs in developing countries and the 25 largest TNCs in Central Europe; analyses the momentum for an increasing globalization of economies through FDI and the activities of TNCs; and explores the growing importance of mergers and acquisitions in fuelling FDI flows. It also reviews recent developments in bilateral and regional investment agreements including the reasons for the end of negotiations of the Multilateral Agreement on Investment.
Part II, entitled FDI and the Challenge of Development, looks at the impact of FDI on key objectives of economic development: increasing financial resources for investment, enhancing technological capabilities, boosting export competitiveness, generating and upgrading employment, and protecting the environment.
The Report concludes that although FDI can yield major economic benefits for the host country, such benefits can be enhanced through appropriate policies. Governments therefore have an important role to play in creating the conditions that attract FDI and in maximizing the positive contribution that FDI can make to growth and development.

1998 - Trends and Determinants

WORLD INVESTMENT REPORT 1997
Transnational corporations, market structure and competition policy

Improving economic efficiency by making markets more competitive -- and thereby serving development -- is subject to the same need to make choices. Given the particular characteristics of developing countries -- low income levels, skewed distribution of wealth, lack of infrastructure, low levels of education, asymmetries in information, to mention a few - - the incidence of conflicts between market outcomes and competing objectives is often more frequent in these countries.
For example, where foreign exchange is temporarily in limited supply, certain import restrictions might be needed -- thus limiting contestability -- to ensure that critical imports are not disrupted, e.g., that foreign exchange reserves are used for machine parts instead of luxury goods. Or, where a country is characterized by dispersed rural communities, the market will often not provide these with certain basic services (such as roads, telecommunications services and railways); in these cases, governments might need to ensure that certain services reach segments of the national market which otherwise could not support such services. They could do so, for instance, by providing the services through state-owned enterprises or, where private operators are involved, by providing these with market power so that services in less-economically viable markets can be cross-subsidized from profits earned in larger segments of the market.48 A policy alternative to consider in such a case would be more direct government involvement in the form of subsidized provision of the services in question. The decision in this case -- whether to allow concentration combined with cross subsidization or to provide subsidies -- would involve a careful consideration of the quite different trade-offs associated with these two options (possibly less efficiency in the market, on the one hand, versus a direct budgetary expense on the other).

1996 - Investment, Trade and International Policy Agreements

1995 - TNCs and Competitiveness

WORLD INVESTMENT REPORT 1994
Transnational corporations, employment and the workplace

The World Investment Report 1994 analyses the impact of an integrated international production system on the quantity and quality of employment, human resource development and, more generally, to the organization of work.
The report includes a statistical annex with FDI statistics and other related indicators.
Policy makers and trade union leaders must find innovative ways to respond to the ongoing changes in the international economy. Not only must they address the many new issues raised by integration at the level of production; but, in a more open and integrated world economy, policy makers must coordinate more carefully the traditional instruments for domestic economic management with policies relating to international economic relations, including, in particular, foreign direct investment (FDI) and other forms of TNC activity.

WORLD INVESTMENT REPORT 1993
Transnational Corporations and Integrated International Production


The World Investment Report 1993 analyses the evolving strategies and changing organizational structures of TNCs, and the implications of the increasing functional, cross-national integration of their activities for the location of international production. In spite of an overall decline in world-wide flows of foreign direct investment in the early 1990s, there are many features of the world economic environment pointing to a continuing and important role for transnational corporations.
The report includes a statistical annex with FDI statistics and other related indicators.

WORLD INVESTMENT REPORT 1992
Transnational Corporations as Engines of Growth

The World Investment Report 1992 analyses the relationship between TNCs and economic growth. Since the early 1980s, world investment flows have been expanding rapidly, much faster than other key economic variables such as world trade and world output. A number of major new developments in the global economic situation have placed foreign direct investment in a central position to influence the pace and the nature of economic growth in most countries. Finally, developing countries themselves have implemented notable and, in many cases, dramatic policy changes, in order to open their economies to greater contributions by transnational corporations.
The report includes a statistical annex with FDI statistics and other related indicators.

WORLD INVESTMENT REPORT 1991
The Triad In Foreign Direct Investment


This first volume in the World Investment Report series analyses the Triad (Japan, the European Community and the United States) in terms of foreign direct investment.
It looks at the role transnational corporations play in promoting regional economic integration around the three poles of the Triad,
describes the linkages between foreign direct investment and trade, technology and financial flows, and
highlights policy implications for developing countries and the international community.

 

 
 
 
 
Foreign Direct Investment in Africa: Performance and Potential, 1999
Many African countries have already done much to create a more business-friendly environment to promote local investment as well as foreign direct investment, and many have made impressive progress towards political and economic stability. In their efforts to revive economic activity they have scaled down bureaucratic obstacles and interventions in their economies, embarked on privatization programmes and are putting in place pro-active investment measures. These efforts -- helped by other factors such as high commodity prices -- have borne fruit in recent years, leading to a turnaround after a long period of economic contraction, in many countries. As a result, for the first time since the early 1980s, per capita gross domestic product of the continent as a whole has grown considerably for a number of consecutive years since 1994. Some countries that not so long ago were being torn apart by civil unrest or war have recovered and are...

OECD - 1999
Southeast Asia: The role of foreign direct investment policies in development
At a time of continuing financial crisis in Asia, the question of the appropriate policies for recovery and for future sustainable development is paramount. One area of particular importance is the treatment of foreign investors. Foreign direct investment (FDI) has played a leading role in many of the economies of the region, particularly in export sectors, and has been a vital source of foreign capital during the crisis. The four countries reviewed in this study1 — Indonesia, Malaysia, the Philippines and Thailand (referred to hereinafter as the ASEAN4) — have all to varying degrees welcomed inward investment for its contribution to exports. As a result, although only a small share of total investment or employment in each economy, FDI has been a key factor driving export-led growth in Southeast Asia. Foreign firms have by no means been the only actors, but they have played a leading role in those sectors with the fastest export growth such as electronics. Through such investment, host economies have rapidly been transformed from agriculture and the exploitation of raw materials into major producers and exporters of manufactured goods.
For many years, Malaysia and Thailand were among the most open in the developing world to foreign investment. They were quick to recognise the powerful role that foreign investors could play in fuelling export-led growth, and they were well-placed to attract such investment during the years of regional structural adjustment in the late 1980s. Partly as a result of FDI inflows, the two countries were among the world’s fastest growing economies before the crisis. At the same time, however, the years leading up to the crisis revealed a growing disquiet in some ASEAN countries about their continuing ability to attract FDI in the face of competition from countries such as China. Related to the issue of possible investment diversion, questions were also raised about whether FDI inflows were contributing sufficiently to technology transfer and industrial upgrading.

From ECLAC:
Foreign Investment in Latin America and the Caribbean
-------
Foreign direct Investment in Latin America and the Caribbean 2009
La inversión extranjera directa en América Latina y el Caribe 2009
Foreign direct investment in Latin America and the Caribbean 2008
Full text document in pdf format (4.224 Kb.)
Content and Summary and Conclusions (440 Kb.)
Chapter I. Foreign direct investment and transnational corporations in Latin America and the Caribbean (1.364 kb.)
Chapter II. Foreign direct investment in offshore business services in Latin America and the Caribbean (416 kb.)
Chapter III. Integrated hotel and real estate complexes: investments and business strategies (1.543 kb.)
Bibliography (603 Kb.)

La inversión extranjera directa en América Latina y el Caribe 2008
Foreign Investment in Latin America and the Caribbean 2007
Full text document in pdf format (4.891 Kb.)
Content and abstract (pdf 114 Kb.)
Summary and conclusions (pdf 226 Kb.)
Chapter I - Foreign direct investment and transnational corporations in Latin America and the Caribbean (pdf 1.330 Kb.)
Chapter II- The information and communications technology hardware industry in Latin America (pdf 523 Kb.)
Chapter III- Telecommunications operators: investment and corporate strategies in Latin America and the Caribbean (pdf 1.369 Kb.)
Chapter IV- Canadian FDI in Latin America and the Caribbean (pdf 936 Kb.)
Bibliography (775 Kb.)

La inversión extranjera en América Latina y el Caribe 2007
Foreign Investment in Latin America and the Caribbean 2006
La inversión extranjera en América Latina y el Caribe 2006
Foreign Investment in Latin America and the Caribbean 2005
La inversión extranjera en América Latina y el Caribe 2005
Foreign investment in Latin America and the Caribbean 2004
Documento informativo Investimento estrangeiro na América Latina e no Caribe 2004
La Inversión extranjera en América Latina y el Caribe 2004
Foreign investment in Latin America and the Caribbean. 2003 Report
La inversión extranjera en América Latina y el Caribe 2003
Foreign Investment in Latin America and the Caribbean, 2003
Foreign investment in Latin America and the Caribbean. 2002 Report
La Inversión Extranjera en América Latina y el Caribe - Informe 2002
Foreign investment in Latin America and the Caribbean. 2001 Report
La Inversión Extranjera en América Latina y el Caribe. Informe 2001
Foreign Investment in Latin America and the Caribbean. 2000 Report
Contents, abstract and foreword in pdf format (96 Kb.)
Summary and conclusions (pdf 52 Kb.)
Introduction: A regulatory challenge (pdf 22 Kb.)
I. Regional panorama (pdf 219 Kb.)
II. Chile: Foreign direct investment and corporate strategies (pdf 207 Kb.)
III. Japan: Investment and corporate strategies in Latin America and the Caribbean (pdf 242 Kb.)
IV. Telecommunications: Investment and corporate strategies in Latin America and the Caribbean (pdf 290 Kb.)
Bibliography (pdf 81 Kb.)

La inversión extranjera en América Latina y el Caribe. Informe 2000
Foreign investment in Latin America and the Caribbean. 1999 Report
La inversión extranjera en América Latina y el Caribe. Informe 1999
Foreign investment in Latin America and the Caribbean. 1998 Report
La inversión extranjera en América Latina y el Caribe. Informe 1998
Foreign investment in Latin America and the Caribbean. 1997 Report
La inversión extranjera en América Latina y el Caribe. Informe 1997
1998 Report on Foreign Investments in Latin America and the Caribbean
Survey of OECD work on International Investment 1998/1

International direct investment is increasingly recognised as an engine of economic growth and a powerful force for global integration. The OECD has long been active in analysing the implications of such forces and in influencing the design of appropriate policies for a global economy. This report summarises the findings of recent OECD work on the role of international investment in globalisation and economic development. Foreign direct investment is defined as capital invested for the purpose of acquiring a lasting interest in an enterprise and of exerting a degree of influence on that enterprise’s operations. Direct investment differs from portfolio investment in that it involves control of the asset in question, while portfolio investors are passive investors, motivated only by the rate of return on the asset. While this distinction is useful for analytical purposes, OECD member countries are increasingly adopting a broader view of FDI which includes many investments otherwise considered as portfolio flows.1 For this reason, the analysis presented below makes occasional reference to portfolio, as well as direct, investments.

United Nations University
World Institute for Development Economic Research:

RP2008/109 Valpy FitzGerald:
Political regime, private investment, and foreign direct investment in developing countries

This paper uses annual aggregate data for 36 low or middle income countries covering the period 1995-2001 to investigate the effect of FDI on private investment. It also explores if the relationship between FDI and private investment is influenced by the nature of the political regime, using four governance measures (voice and accountability, regulatory quality, political stability, and control of corruption) to distinguish between ‘market-friendly’ (high or good governance values) and ‘market-unfriendly’ (low governance) regimes. The results, which hold for all of the governance measures, show that private investment is more important than FDI in terms of the contribution to total investment, and that FDI inflows and private investment are higher in countries with good governance. Interestingly, the findings demonstrate that FDI tends to displace domestic private investment, and this ‘crowding out’ effect is greater in countries with good governance.

RP2006/35 Valpy FitzGerald:
International Risk Tolerance, Capital Market Failure and Capital Flows to Emerging Markets

The level, tenor and instability of capital flows from global financial markets towards developing countries are a major source of concern for macroeconomic managers, while their causes remain largely unexplained by economic theory. Country ‘fundamentals’ (such as economic growth, monetary stability and institutional capacity) as sources of default risk have been the main focus of economic research and policy prescriptions. However, recent empirical research on the determinants of capital flows and the roots of market failure indicate that much of the explanation lies in the nature of the home (that is, the developed country) demand for emerging market assets. In this paper, the microeconomic roots of home bias and demand instability are explained in terms of investor risk perception and credit rationing, exacerbated by traders’ behaviour. The consequences for host country macroeconomic balances and income distribution of varying investor risk tolerance are then demonstrated. Although the net impact also depends upon the host policy response, this transmission mechanism means that host ‘fundamentals’ are themselves strongly affected by capital flows and thus cannot be considered as to be independent of home asset demand. The paper concludes by examining the implications of these findings for the future of development economics in general and for policy response in particular.

RP2005/31 Henrik Hansen and John Rand:
On the Causal Links between FDI and Growth in Developing Countries

We analyse the Granger causal relationships between foreign direct investment (FDI) and GDP in a sample of 31 developing countries covering 31 years. Using estimators for heterogeneous panel data we find bi-directional causality between the FDI-to-GDP ratio and the level of GDP. FDI has a lasting impact on GDP, while GDP has no longrun impact on the FDI-to-GDP ratio. In that sense FDI causes growth. Furthermore, in a model for GDP and FDI as a fraction of gross capital formation (GCF) we also find long-run effects from FDI to GDP. This finding may be interpreted as evidence in favour of the hypotheses that FDI has an impact on GDP via knowledge transfers and adoption of new technology.

RP2005/26 Roghieh Gholami, Sang-Yong Tom Lee and Almas Heshmati:
The Causal Relationship between ICT and FDI

This paper investigates the simultaneous causal relationship between investments in information and communication technology (ICT) and flows of foreign direct investment (FDI), with reference to its implications on economic growth. For the empirical analysis we use data from 23 major countries with heterogeneous economic development for the period 1976–99. Our causality test results suggest that there is a causal relationship from ICT to FDI in developed countries, which means that a higher level of ICT investment leads to an increase inflow of FDI. ICT may contribute to economic growth indirectly by attracting more FDI. Contrarily, we could not find significant causality from ICT to FDI in developing countries. Instead, we have partial evidence of opposite causality relationship. The inflow of FDI causes further increases in ICT investment and production capacity.

RP2005/25 Abdur Chowdhury and George Mavrotas:
FDI and Growth: A Causal Relationship

The paper examines the causal relationship between FDI and economic growth by using an innovative econometric methodology to study the direction of causality between the two variables. We apply our methodology, based on the Toda-Yamamoto test for causality, to time-series data covering the period 1969-2000 for three developing countries, namely Chile, Malaysia and Thailand, all of them major recipients of FDI with a different history of macroeconomic episodes, policy regimes and growth patterns. Our empirical findings clearly suggest that it is GDP that causes FDI in the case of Chile and not vice versa, while for both Malaysia and Thailand, there is a strong evidence of a bi-directional causality between the two variables. The robustness of the above findings is confirmed by the use of a bootstrap test employed to test the validity of our results.

RP2005/24 Elizabeth Asiedu:
Foreign Direct Investment in Africa: The Role of Natural Resources, Market Size, Government Policy, Institutions and Political Instability

Data from several investor surveys suggest that macroeconomic instability, investment restrictions, corruption and political instability have a negative impact on foreign direct investment (FDI) to Africa. However, the relationship between FDI and these country characteristics has not been studied. This paper uses panel data for 22 countries over the period 1984-2000 to examine the impact of natural resources, market size, government policies, political instability and the quality of the host country’s institutions on FDI. It also analyses the importance of natural resources and market size vis-ŕ-vis government policy and the host country’s institutions in directing FDI flows. The main result is that natural resources and large markets promote FDI. However, lower inflation, good infrastructure, an educated population, openness to FDI, less corruption, political stability and a reliable legal system have a similar effect. A benchmark specification shows that a decline in the corruption from the level of Nigeria to that of South Africa has the same positive effect on FDI as increasing the share of fuels and minerals in total exports by about 35 per cent. These results suggest that countries that are small or lack natural resources can attract FDI by improving their institutions and policy environment.

RP2004/64 Yuqing Xing and Guanghua Wan:
Exchange Rates and Competition for FDI

This paper analyses the role of exchange rates in the competition for FDI. Based on the assumption that two countries compete for FDI from the same source country, the paper shows explicitly that the relative FDI of one country is determined by the relative real exchange rate between its currency and that of the source country. The theoretical result suggests that, if the currency of one FDI recipient country appreciates against the source country more than that of its rival, its FDI inflows will decrease while the competing country’s FDI will increase. Using data on Japan’s FDI in nine Asian manufacturing sectors from 1981 to 2002, the paper also examines the theoretical conclusion in the context of the competition between China and ASEAN-4 (Indonesia, Malaysia, the Philippines and Thailand). Empirical results show that the relative exchange rate is a statistically significant factor determining the relative inflows of Japanese FDI for manufacturing as a whole and for such sub-sectors as textiles, food, electronics, transportation equipment, and others. Exchange rate polices of the ASEAN-4 countries played a critical role in dynamically reshaping the geographic distribution of Japan’s FDI in Asia.

DP2003/75 Jonathan P. Thomas:
Bankruptcy Proceedings for Sovereign State Insolvency and their Effect on Capital Flows

The paper examines the main issues involved in translating domestic bankruptcy procedures to the sovereign context. It considers some of the principles by which domestic bankruptcy procedures operate, and the extent to which they apply to international lending. Two recent proposals are considered in more detail, that of Krueger (‘A New Approach to Sovereign Debt Restructuring’) and that of Pettifor (‘Resolving International Debt Crises – The Jubilee Framework for International Insolvency’). The paper also considers the question of the ex ante effects of a procedure which makes default less costly, and concludes that despite a negative impact on the ability to borrow, the overall welfare effect need not be negative.

DP2003/45 Tony Addison and Almas Heshmati:
The New Global Determinants of FDI Flows to Developing Countries: The Importance of ICT and Democratization

Foreign direct investment (FDI) has increased dramatically in recent years. However, the distribution of FDI is highly unequal and very poor countries face major difficulties in attracting foreign investors. This paper investigates the determinants of FDI inflows to developing countries, with a particular emphasis on the impact of the ‘third wave of democratization’ that started in the early 1980s and the spread of information and communication technology (ICT) that began in the late 1980s. These two global developments must now be taken into account in any explanation of what determines FDI flows. Using a large sample of countries, together with panel data techniques, the paper explores the determinants of FDI. The causal relationship between FDI, GDP growth, trade openness and ICT is investigated. The main findings are that democratization and ICT increase FDI inflows to developing countries. The paper concludes that more assistance should be given to poorer countries to help them to adopt ICT and to break out of their present ‘low ICT equilibrium’ trap.

DP2003/43 Matthew Odedokun:
The ‘Pull’ and ‘Push’ Factors in North-South Private Capital Flows: Conceptual Issues and Empirical Estimates

This paper is an attempt to rectify some of the problems that characterize most earlier studies that seek to explain private capital flows to developing countries or, at least, to examine the subject from a different and complementary perspective. To accomplish this, we propose a model framework that approaches the issue from the perspective of a capital-exporting developed country and which also takes cognizance of developments in other industrialized countries that could be competing with developing countries for private capital flows. The model is operationalized and estimated with annual panel data over 1970-2000 for 19 capital-exporting developed countries. Specifically, we estimate equations for total private flows, FDI, total portfolio capital flows (PCF) and various categories of PCF. We also test for the effects of a number of factors, each of which has its own ‘push’ and ‘pull’ components. The specific explanatory factors are the level of per capita income, interest rate, economic growth, the prevailing phase of economic cycle, the degree of openness of the economy in the balance-of-payment capital account, macroeconomic imbalances, and external debt burden. The empirical findings confirm the posited effects of the ‘push’ and/or ‘pull’ component of each of the above factors.

DP2003/30 Roghieh Gholami, Sang-Yong Tom Lee and Almas Heshmati:
The Causal Relationship between Information and Communication Technology and Foreign Direct Investment

This paper investigates the simultaneous causal relationship between investments in information and communication technology (ICT) and foreign direct investment (FDI), with reference to its implications on economic growth. For the empirical analysis we use data from 23 major countries with heterogeneous economics development for the period 1976–99. The results of unit roots and Johansen co-integration tests indicate variations in degrees of integration among the sample countries. Our causality test results suggest that there is a causal relationship from ICT to FDI interpreted as the higher level of ICT investment leads to increased inflow of FDI. ICT contributes to economic growth indirectly by attracting more foreign direct investment. In developed countries there already exist a build up ICT capacity which causes inflow of FDI, while in developing countries ICT capacity must be build up to attract FDI. The inflow of FDI causes further increases in ICT investment and capacity.

DP2003/02 Oluyele Akinkugbe:
Flow of Foreign Direct Investment to Hitherto Neglected Developing Countries

The last decade or so has witnessed rather dramatic increases in the flow of foreign direct investment (FDI) to the developing countries of the world. However, the balance of evidence seems to point in one direction, the inflow has been uneven. Middle-income developing countries have benefited from this upsurge at the expense of the lower-income countries. In an attempt to explore the two complimentary issues involved in FDI flows, we adopted the two-part econometric approach in which a Probit model was first estimated in order to examine the binary issue of whether or not to locate FDI in hitherto neglected developing countries. In the second step, a panel regression model was employed to examine the factors that may explain the volume of FDI to further allocate to existing FDI-receiving countries. Our findings reveal that a combination of high per capita income, outward-orientation to international trade, a high level of infrastructure development and a high rate of return on investment are the significant decision parameters in the two-part aggregate investors’ behaviour analyses.

DP2003/01 Matthew Odedokun:
A Holistic Perception of Foreign Financing of Developing Countries’ Private Sectors: Analysis and Description of Structure and Trends

The paper presents a comprehensive survey of the ‘shopping list’ of sources of external finance that are directly channelled to the business sector of developing countries. Generally, our analytical survey covers the 1970-2000 period, and includes the distribution of foreign resources classified according to the different income-based and geographical breakdown of developing countries. We examine aggregate net resource flows in the form of the saving-investment gap and current account surplus in the balance-of-payments of developed countries. Also examined is the institutionalized component of this aggregate, which encompasses both official and private flows. In addition, we discuss the different components of private flows, including unrequited private transfers (grants by NGOs and workers’ remittances) and commercial capital flows (private flows to multilateral institutions and bilateral private capital flows in the form of foreign direct investments and portfolio capital flows) to developing countries.

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