(EGM) Foreign Direct Investment in Southeast Asia - Unido

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policies, as they would treat foreign and domestic firms equally with regard to incentives. The presentation examined in detail the actual policy instruments for attracting, promoting and accompanying FDI. It is important to bear in mind that the design and the implementation of policies firstly depend on the actual policy instruments. Secondly, they should be converted into law. In fact, it is the country’s legal and regulatory system that is the highest authority in attracting, guiding and shaping inward FDI, and it is of crucial importance that all policy tools are translated into consistent national laws or sub-laws. The different policy instruments and regulatory measures are related to; i) admission and project establishment; ii) ownership and control issues; iii) the actual FDI operations; and iv) the main incentives offered to foreign investors. The advantages and disadvantages of FDI policy instruments arise not in absolute terms but relatively from the way they are calibrated and recalibrated and applied in changing circumstances. For example, regarding ownership, a primary resource driven economy would need high modal neutrality to enable wholly owned subsidiaries (as the likelihood of local firms able to joint venture meaningfully would be low) and have policy instruments that secure property rights. It would be disadvantageous to insist on FDI policy that required MNEs to joint venture with local firms in order to invest in vertically specialised minerals production. Regarding capital depreciation as another example, policies need careful calibration or else intended beneficiaries might not actually alter their capital/labour ratios and capital intensities, in order to upgrade the technological capacity of manufacturing industry. The discussion on the pros and cons of specific FDI policy instruments actually embodies the debate on whether developing countries should opt for reform in the direction of greater policy liberalisation, or greater policy regulation. Shafaeddin (2000) argues that no country has developed its 26
industrial base without relying to some extent on infant industry protection. “Both early industrialised and newly industrialised countries applied the same principle, although to varying degrees and in different ways” (p. 2). In a world of different levels of industrialisation, market failures do not enable free international competition to promote effective industrialisation in the least developed countries. Therefore, it appears reasonable that developing countries encourage their infant industry by using the regulation of foreign investment. Nevertheless, regulation should be on a selective, rather than on a universal, basis and the level of protection should not be excessive. It is also arguable that regulation impedes FDI activity, and thus disfavours developing countries. In fact, these countries often have very high official costs of entry, and MNEs have to follow long procedures before investing. Whereas regulation is meant to achieve socially superior outcomes by countering market failures (such as monopolies and negative externalities), in real terms regulation is very often associated with higher corruption and unofficial economies. Gratuitous regulation can benefit the regulator and not the whole society, and can prevent MNEs from investing. Therefore, extensive regulation can have the opposite effect from its initial purpose, since it is associated with socially inferior outcomes. Thus, as a logical corollary, FDI policies should be liberalised. However, it is worth mentioning that policies aiming at liberalising FDI are not necessarily the best policies for creating a favourable investment climate, and even less so for attracting or promoting FDI. Moreover, one can note that the liberalisation process should not be seen as a decline of the role of the state, since the measures mentioned above relate to government regulation. In fact, whereas the two first measures imply FDI liberalisation, their overall beneficial impact depends highly on the presence of competent and well-organised market supervision. Thus, one can argue that liberalisation and regulation of FDI are not contradictory, but rather complementary, in order to attract and promote FDI that is beneficial for boosting industrial development. 27
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 24 and 25: and viii) general foreign investor
Page 26 and 27: Investment policy craft -- creating
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
Page 74 and 75: usiness domestically (improving int
Page 76 and 77: intra-industry trade, which account
Page 78 and 79:
The agglomeration of markets and di
Page 80 and 81:
These patterns are characterised by
Page 82 and 83:
etween locations and maximises the
Page 84 and 85:
ecome insiders and thus avoid being
Page 86 and 87:
(iv) Those that relate to the “pu
Page 88 and 89:
their indicators 50 of industrial p
Page 90 and 91:
evolve more rapidly to account for
Page 92 and 93:
changing morphology of MNEs with a
Page 94 and 95:
92 Appendix I - Doing Business in A
Page 96 and 97:
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,
Page 102 and 103:
McKinsey & Company, 2003, New Horiz
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(EGM) Foreign Direct Investment in Southeast Asia - Unido

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