Post 2015: Global Action for an Inclusive and Sustainable Future

CHApTER EIgHT
FDI flows from
Brazil, Russia,
India and China
have increased
rapidly over
the past decade,
reaching about
$100 billion in
2009.
146
seem to take advantage mostly of investments in
infrastructure and industry.
In addition, DFIs also contribute to enhancing
economic inclusion, which is a determining factor
in alleviating poverty and achieving sustainable
and inclusive growth. Indeed, by providing direct
and indirect financial support (e.g. through
financial institutions, microfinance institutions,
investment funds and non-bank financial
institutions), capacity-building for households
and small and medium-sized enterprises (SmEs),
and by supporting the development of financial
infrastructure (e.g. credit bureaux and collateral
registries), they contribute to making finance
accessible, available and affordable (massa, 2012).
In promoting private-sector investments, DFIs
can provide complementary financing in poor
countries, as well as ensuring that best practices are
disseminated and embedded within policy.
8.3.3 The increasing role of emerging
economies as investors in LICs: new
opportunities and challenges
although most FDI flows to lIcs originate from
developed countries, emerging economies are
increasingly important investors. In particular,
FDI flows from brazil, russia, India and china
have increased rapidly over the past decade,
reaching about $100 billion in 2009 (mlachila and
takebe, 2011). among brIcs, china has been the
biggest investor in lIcs, showing a 20-fold increase
between 2003 and 2009 (ibid.). notably, although
the global financial crisis weakened investment
from oEcD countries, FDI flows from brIcs have
continued to rise steadily (massa, 2010).
FDI flows from investors in emerging economies
have been led mainly by a strong motivation to
acquire new markets and gain access to natural
resources, although brIcs’ investment also includes
infrastructure, agriculture, manufacturing and
EuropEan rEport on DEvElopmEnt 2013
service industries. In SSa for example, brazilian
and chinese investment is focused mainly on the
oil and mining sectors, the bulk of Indian FDI
is in manufacturing and services, and russia is
increasing its interest in financial services and
telecommunications (massa, 2010; mlachila and
takebe, 2011). china also invests in infrastructure
in SSa countries, a sector which is vital but which
oEcD donors have often neglected in favour of the
social sector (massa, 2011a; Dabla-norris et al., 2010).
the FDI flows from brIcs are expected to become
more important in the economic performance of
lIcs in the future. Indeed, they provide resources
that can be used to build physical capital, thus
directly enhancing the productive capacity of
recipient countries. this FDI also brings a number
of indirect benefits that may contribute to overall
economic growth. For example, investment
can improve local skills, promote the transfer
of technological know-how, and enhance the
competitiveness, performance and efficiency of
domestic firms. china, for example, offers training
to african professional workers 98 (massa, 2011a).
In addition, FDI flows from brIcs have the
potential to increase significantly overall levels
of FDI in countries in which traditional oEcD
investors may be unwilling to invest because they
consider them too risky or corrupt. moreover, brIcs
contribute to filling the FDI void left by oEcD
investors in the wake of the global economic and
financial crisis, thus helping developing countries
to counteract its negative effects on productive
investments.
Despite some of the positive attributes of
FDI from the emerging economies in poorer
developing countries, it is not necessarily riskfree
for recipient countries, as becomes clear from
work on the drawbacks of chinese investment in
african countries (massa, 2011a). First, unlike most
98 between 2000 and 2006, 16,000 african professionals were trained in china; another 15,000 between 2007 and 2009; and a further 20,000 were
expected to receive training between 2010 and 2012 (massa, 2011a).