Investment statistics and analysis
International Investment Perspectives, No.1 2002
The first issue of a new annual OECD publication includes articles about foreign investment in China, the implications for host country welfare conditions of cross-border investment in the oil and mining sectors, and the challenges of capital movement liberalisation in transition and developing economies.
International Investment Perspectives, focusing on information about foreign direct investment and the activities of multinational enterprises, is expected to appear each year in September. Each issue will contain a Trends and Recent Development article about latest developments in direct investment and cross-border mergers and acquisitions. Feature articles will range from empirical research to analysis of investment and enterprises, policy statements and debate. A "Tribune" debate forum in each issue will give members of civil society and other non-OECD entities the opportunity to air their views on selected topics.
Details of the articles in the first issue are as follows:
- Trends and Recent Developments in FDI. FDI flows into OECD countries in 2001 declined more steeply than ever before in recorded history. From an all-time-high of 1.27 trillion US$ in 2000, inflows fell to 566 billion US$ 2001. In relative terms, this represents a 56 per cent drop. The decline appears to have continued into 2002, albeit at a reduced rate. Using mergers and acquisitions in the first half of the year as a rough indicator, it would appear that direct investment inflows to OECD countries on current trends are likely to recede by an additional 20 to 25 per cent this year.
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- Foreign Investment in China's Regional Development. China is one of the world's principal recipients of FDI, but the investment it attracts is unevenly distributed across the country. The eastern coastal regions account for almost 90 percent of the country's total FDI, while the central and western regions lag far behind. To redress this growing imbalance, Chinese authorities have put in place their so-called "Go West" strategy. On the basis of best practices in OECD countries and China's most successful regions, this article proposes ways of creating a better environment for investment in China's more backward regions.
- Multinational Enterprises and the Quality of Governance: A Case Study of Extractive Industries. This article presents a survey of the public statements of 59 oil and mining companies based in OECD countries. It shows that companies generally highlight their efforts at providing social services (e.g. education and health) and local infrastructure (e.g. roads and water). However, while community development and the revenues generated by these companies' activities may well enhance host country welfare, the long-run key to reaping the full benefits of inward investment lies in creating healthier systems of public governance. Extractive industry companies can help to create momentum for reform by increasing the transparency of their financial relations with host governments and by speaking openly about the problems they encounter when investing in countries with weak public governance.
- Successful Capital Movements Liberalisation: A Question of Governance. While full freedom of capital movements was achieved by most OECD members more than a decade ago, and in some even earlier, countries that joined the OECD in the last decade (Korea, Mexico, Poland, the Czech Republic, Hungary and the Slovak Republic) have only recently attained similar levels of liberalisation. This article draws some lessons from recent liberalisation processes against the background of the currency and financial crises that many of these countries have experienced. Among the main conclusions is that economic reforms, while generally recommendable, they to be complete. Half-liberalised systems can give rise to severe imbalances which may be extremely costly to address.
- The Economics of International Investment Incentives. The author of this article, Professor Magnus Blomström of the Stockholm School of Economics, argues that policies to attract FDI by means of financial and fiscal incentives should be guided by careful consideration of the relative advantages of foreign over domestic investment -- especially in relation to so-called spillovers. If significant spillovers cannot be proven, policies of improving the enabling environment for investment or generic efforts at investment promotion are arguably more useful than targeted incentives aimed at foreign investors. Download the full text of this article in pdf format.
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