(EGM) Foreign Direct Investment in Southeast Asia - Unido

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and viii) general foreign investor confidence 8 . Simultaneously, policy discretion has been diminished by the rules-based approach. In terms of competitive industrial performance, the policy factors (and variables) reflect industrial capacity and complexity 9 . In terms of taxation, the pertinent factors and variables of investment promotion cover direct taxes (such as personal and corporate income taxes) and indirect fiscal measures (such consumption and transaction taxes). Although the priorities of governments and the objectives of MNEs tend to differ, their interaction is of fundamental importance to economic growth and technological development. Governments are primarily concerned with increasing welfare functions within the national economy, for the benefit of their citizens. MNEs are primarily concerned with maximising the long-term value of the firm, for the benefit of shareholders (who may or may not be citizens in the same country as the FDI project). These respective duties do not always coincide or converge. Indeed, they can be highly co-operative and/or conflicting. The issue of policy craft for FDI is therefore increasingly crucial to the economic well-being of developing countries. Therefore, economic policies intended to attract, promote and enhance inward FDI are essential tools that need to be brought into the armoury of the policy-making community. Further, investment policy should be aligned with a host country’s industrial policy, as well as with its wider development goals [UNIDO (2005)]. The governments of developing countries choose policy instruments -- generalised as incentives 10 -- to attract FDI activity, and different dimensions of incentives can be depicted. Firstly, incentives can be either general or specific (with a discretionary perspective). 7 Trade policy, fiscal burden of government, government intervention in economy, monetary policy, FDI and FPI, banking and finance, wages and prices, property rights. 8 Propensity of firms to undertake FDI in a particular location. 9 A country’s Industrial Capability Profile, comprises: manufacturing value-added (MVA) per capita in conjunction with manufactured exports per capita; and share of medium- and high-technology (MHT) in MVA in conjunction with share of MHT in exports. The first pair of indices indicates industrial capacity and competitiveness, whereas the second pair connotes industrial depth and complexity. See UNIDO 2002/2003 Industrial Development Report, Competitive Industrial Performance Index. 10 Not to be confused with the special category of fiscal or financial incentives. 22
A second dimension is that incentives can be either permanent or temporal. However, pragmatically it is useful of think of policy instruments as windows of opportunity which open and close. A third dimension exists at the geographic level, since investment promotion policies can target FDI either at a national level or at a regional or local level. Locality-specific incentives can be used to promote special regions of a country that are poorer, or in greater need of development. Further, incentives can be used to attract foreign investors to the whole economy or only to certain sectors or sub-sectors, according to the specific needs of the country. This set of policy instruments is often geared to accelerating technology transfer and diffusion, in a bid to increase the Competitive Industrial Performance Index, by raising the relative share of medium- and high-technology intensity of exports and manufacturing value added. In the past, this has often entailed ‘negative’ or ‘positive’ lists which either cordoned off, or ring-fenced in, strategic sectors of the economy to foreign investors, and reserved other sectors for national firms only. Finally, at the firm level, incentives can focus either on all FDI, or only on specific investors. These various dimensions are depicted in Figure 2, below. A FRAMEWORK FOR OPERATIONALISING FDI POLICY DIMENSIONS & INSTRUMENTS POLICY CRAFT META- MACRO- MESO- MICRO- FIRM-LEVEL POLICY LEGAL GENERAL – SPECIFIC PERMANENT – TEMPORAL NATIONAL – REGIONAL (LOCAL) POLICY INST’S FDI FACTORS & VARIABLES ECONOMY WIDE – SECTORS (SUB-SECTORS) ALL INVESTORS - SPECIFIC INVESTORS FISCAL – NON-FISCAL 23 POLICY SCALE MEASURES META- MACRO- MESO- MICRO- FIRM-LEVEL POLICY RESEARCH & ANALYSIS SHORT-, SHORT , MEDIUM- MEDIUM & LONG-TERM LONG TERM ADJUSTMENT ACROSS ECONOMIC SPACE Figure 2: A Framework for ‘Operationalising’ FDI Policy Dimensions and Instruments
Page 3: Foreign Direct Investment in Southe
Page 6 and 7: Abbreviations and Acronyms ADB Asia
Page 8 and 9: thinkers and writers on FDI and mat
Page 10 and 11: The realignment of structural facto
Page 12 and 13: Recent years have seen increasing c
Page 14 and 15: overlap according to production pro
Page 16 and 17: enchmark rankings should be one aim
Page 18 and 19: Theme 2 FDI and National Experience
Page 20 and 21: ‘pipeline’ of harmonising legis
Page 22 and 23: major determinant of success. This
Page 26 and 27: Investment policy craft -- creating
Page 28 and 29: policies, as they would treat forei
Page 30 and 31: It appears that the advantages and
Page 32 and 33: seeking to attract FDI? Examining t
Page 34 and 35: attractiveness of the region to inv
Page 36 and 37: Theme 4 FDI and the China Dimension
Page 38 and 39: greater regional collaboration, the
Page 40 and 41: The increasing significance of outs
Page 42 and 43: aise their own finance like any oth
Page 44 and 45: Notwithstanding the dynamics of ris
Page 46 and 47: The logistics of the UNIDO ITPO Del
Page 48 and 49: no longer be an appropriate indicat
Page 50 and 51: FDI lens. Consequently, some IPAs h
Page 52 and 53: Select References Bartels F.L. and
Page 54 and 55: Annex 2: Participants at the EGM Co
Page 56 and 57: Appendix I: Thematic Programme of t
Page 58 and 59: 12.30-14.0 Lunch Plenary Discussion
Page 60 and 61: Appendix II: Opening Statement by t
Page 62 and 63: Appendix III: Opening Statement by
Page 64 and 65: and practitioners in other developi
Page 66 and 67: The themes of the EGM have been car
Page 68 and 69: Appendix V: EGM Working Paper EF Un
Page 70 and 71: ABSTRACT This working paper discuss
Page 72 and 73: In recent years, we have seen incre
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usiness domestically (improving int
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intra-industry trade, which account
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The agglomeration of markets and di
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These patterns are characterised by
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etween locations and maximises the
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ecome insiders and thus avoid being
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(iv) Those that relate to the “pu
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their indicators 50 of industrial p
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evolve more rapidly to account for
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changing morphology of MNEs with a
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92 Appendix I - Doing Business in A
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94 Appendix II - ASEAN Investment C
Page 98 and 99:
96 Appendix III - Ranking of Econom
Page 100 and 101:
Buckley P. J., Carter M. J., 2004,
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McKinsey & Company, 2003, New Horiz
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