(EGM) Foreign Direct Investment in Southeast Asia - Unido

aise their own finance like any other input. Firms’ success will therefore
depend in part on finding cheap and reliable sources of funding, which in turn
requires liquid and efficient financial markets. For those smaller economies
in Southeast Asia that cannot justify the fixed costs of operating their own
capital and stock markets, there would be utility in establishing links with
those in neighbouring countries.
One source of foreign investment that is relatively new to Southeast Asia is
private equity, as a hybrid cross-over between FDI and portfolio investment.
In 2004 alone, US$2.8bn was raised for private equity in Asia (excluding
Japan), and US$6bn was invested across over 180 deals. Often focusing on
specific business sectors, private equity investors increasingly work in areas
that host country governments wish to see development, including:
technology, life sciences, infrastructure projects, and even mezzanine
funding for expanding SMEs. But crucially, private equity investors tend to
be scarce unless there is a stock market present that allows them to exist
from their investee companies. Recent years have seen members of the
donor community also get directly involved in private equity investment
funds, as investors and providers of technical assistance.
Previous presentations discussed the importance of developing countries and
their corporate sectors ‘plugging into’ the ‘integrated global factory’. For
most countries, the bulk of the corporate community is made up of SMEs
which need technical and other assistance to scale up their operations and
develop their competencies and capabilities to a level that would allow them
to become part of the global factory. In this context, SME sector
development policy and enterprise investment and technology upgrading
programmes should be part of FDI policy, and vice versa. Indeed, FDI policy
should not only be an integrated part of a country’s industrial (and financial)
policy framework. This in turn necessitates that a high level of inter-agency
communication and collaboration exists between pertinent government
bodies. FDI promotion can no longer be the sole preserve of an IPA and/or a
single ministry mandated to oversee investment activity.
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