TRENDS AND IMPACTS OF FOREIGN INVESTMENT IN DEVELOPING COUNTRY AGRICULTURE

Trends and impacts of foreign investment in
developing country agriculture
2. FDI’s contribution to growth coverage, inconsistent sectoral classification and
categorization, etc. In this regard, it was observed
by (Lowder and Carisma, 2011) 7 that the long-
Although FDI has made
significant contribution to
growth in many developing
countries, for a good number of
them, the development effects are yet
to be realized. However, considerable efforts
are needed to collect and maintain data and
databases on FDI flows in a coherent and
consistent manner to enable analysis of its
long-term development effects.
FDI has been shown to play an important
role in promoting economic growth, raising a
country’s technological level, and creating new
employment in developing countries (Borenzstein,
De Gregorio, and Lee. 1998) 5 . It has also been
shown that FDI works as a means of integrating
developing countries into the global market
place and increasing the capital available for
investment, thus leading to increased economic
growth needed to reduce poverty and raise living
standards. At the same time many countries have
understood the role played by FDI and they have
taken steps to remove investment barriers. For
example, during the 1990s, 1000 FDI law and
regulations were amended of which 94 percent
were amended principally to attract FDI (UNCTAD,
2010) 6 . In an effort to attract FDI, many countries
have implemented incentives including tax
exemption, government pledges, tariff reduction
on equipment and machinery imports, subsidy,
etc. These are dealt with in greater detail in the
country case studies.
It is worth pointing out, at the outset, that
data on investment flows and stocks are often
not collected in a consistent manner and suffers
from several shortcomings including country
5 Borenzstein, Eduardo; Jose De Gregorio and Jong-
Wha Lee: How does Foreign Direct Investment Affect
Economic Growth? Journal of International Economics,
45: 115-135 (1998)
6 UNCTAD (2010): World Investment Report 2010, United
Nations, New York.
16
term aggregate growth in FDI is more due to the
expansion of countries reported with data than
an overall trend movement. However, in this
analysis, country level data are utilized as much
as possible which might overcome the problem
noted above.
Figure 1 depicts the long-term trend (1980-
2010) of FDI flows for Africa, Asia and Latin
America. FDI flows to each of these three regions
over the last two decades starting from the 1990s
have been growing at an average annual rate
of 15.3 percent in Africa, 14.3 percent in Latin
America and 16.8 percent in Asia.
Figure 2 presents the trends in FDI for the
African countries under consideration with the
behaviour of the trends exhibiting identical
FIGURE 1
Trends in FDI flows to Africa, Asia and
Latin America, 1980-2012
Billion US $
400
350
300
250
200
150
100
50
0
1980
1985
1990
1995
Latin America Asia Africa
Source: Adapted from UNCTAD, 2009
2000
2005
2010
7 For a detailed exposé of the global databases on FDI, see:
Sarah K. Lowder and Brian Carisma, Financial resource
flows to agriculture: A review of data on government
spending, official development assistance and foreign
direct investment; FAO-ESA working paper No. 11-19;
December 2011 - www.fao.org/economic/esa. This paper
presents a detailed analysis of existing databases on FDI
with a critique of their strengths and shortcomings.