falling fdi in 2008
TRANSCRIPT
By QU Yi
Long term investment by a foreign direct investor in an enterprise resident in an economy other than that in which the foreign direct investor is based
The FDI relationship, consists of a parent enterprise and a foreign affiliate which together form a transnational corporation
Parent enterprise investment must afford the parent enterprise control over its foreign affiliate
Greenfield Investment Mergers & Acquisitions
Direct investment in new facilities/ expansion of existing facilities
Objective to create new production capacity and jobs, transfer technology and know-how and form linkages to the global marketplace
Primary type of FDI involving transfer of existing assets from local firms to foreign firms
Assets and operation of firms from different countries are combined to establish a new legal entity (Cross-border merger)
Advantages Disadvantages
Inflow of equipment & technology
Competitive advantage & innovation
Financial resources for expansion
Employment generation
Contribution to exports growth
Access to global marketplace for domestic players
Access to low cost resources for investor
Access to new market / distribution channel
Improved consumer welfare
Crowding of local industry
Loss of control
Repatriation of profits/dividends by investor
Conflicts of codes/laws
Possible exploitation of resources- material/ wages
Effect on local culture/sentiments –socio cultural effect
Effect on natural environment
Attracting long-term foreign capital to supplement domestic investment efforts, particularly in infrastructure and export competitive sectors
Creating skilled employment opportunities and import of world class managerial practices
Developing attractive configurations of local advantages at global level
Promoting technology and other linkages to enhance domestic industry competitiveness
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
1800000
2000000
19
71
19
73
19
75
19
77
19
79
19
81
19
83
19
85
19
87
19
89
19
91
19
93
19
95
19
97
19
99
20
01
20
03
20
05
20
07
World Developing economies Developed economies
-100000
0
100000
200000
300000
400000
500000
600000
700000
800000
900000
19
71
19
73
19
75
19
77
19
79
19
81
19
83
19
85
19
87
19
89
19
91
19
93
19
95
19
97
19
99
20
01
20
03
20
05
20
07
US UK EU Japan
-20000
0
20000
40000
60000
80000
100000
19
71
19
73
19
75
19
77
19
79
19
81
19
83
19
85
19
87
19
89
19
91
19
93
19
95
19
97
19
99
20
01
20
03
20
05
20
07
Brazil Russia India China
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
1800000
2000000
1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007
World
0
10000
20000
30000
40000
50000
60000
70000
80000
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
World
0
50000
100000
150000
200000
250000
300000
350000
1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007
US
-20000
0
20000
40000
60000
80000
100000
19
71
19
73
19
75
19
77
19
79
19
81
19
83
19
85
19
87
19
89
19
91
19
93
19
95
19
97
19
99
20
01
20
03
20
05
20
07
Brazil Russia India China
Global economic recession
Tighter credit conditions
Falling corporate profits
Gloomy prospects and uncertainties for global economic growth
Curtail production, lay off, and capital expenditures cut