(EGM) Foreign Direct Investment in Southeast Asia - Unido

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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. 40
Finally, there is also a need for ingenuity and flexibility in a country’s policy craft towards FDI, which not only creates a conducive and equitable enabling business environment, but also sparks the imagination and stimulates the creative juices of investors, both foreign and local, large and small. Commentary and discussion The utility of stock markets as a way of improving corporate governance practices should also be recognised. Frank Bartels indicated that with specific regard to improving corporate disclosure levels, this can help developing countries to increase tax revenues by widening the corporate tax base and improving enforcement and collection. The considerable remittances that nationals residing overseas now send back have become the focus of greater attention of late. Some studies suggest that over US$90bn in annual global remittance flows to developing countries exceed annual Official Development Assistance (ODA) flows of around US$70bn. However, most countries have not been particularly active or successful in designing institutions and financial instruments that could direct a proportion of these flows into investment in productive assets, thus helping the domestic industrial sector to grow. Developing financial instruments of an appropriate level of sophistication, and viable transaction costs, can only be effectively developed in an environment of corporate governance regulation which is not stifling of innovation but, at the same time, is capable of identifying and prosecuting against malfeasance. This implies policy attention to issues of transparency, judicial independence and, again, inter-agency co-ordination to prevent businesses being able to exploit regulatory inconsistencies. The importance of remittances finding quality yields in differentiated asset classes, in order to avoid ‘asset bubbles’, was highlighted as one of the set of issues requiring attention. The usually low risk appetite of domestic investors was also recognised, as was the need to broaden the policy advocacy roles of IPAs into awareness-building among industry associations. 41
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 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 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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