Putting it to Work in Developing Countries - Nathan Associates

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Table 4-1 Sector Distribution of Estimated Inward FDI Stock, 1990 and 2004 (US$ billion) Developing Countries a Other/ Primary Manufacturing Services Unspecified Total $ % $ % $ % $ % $ % 1990 23.7 7.3 144.4 44.6 151.6 46.8 4.1 1.3 323.7 100.0 2004 151.6 7.4 613.6 30.0 1224.4 60.0 52.5 2.6 2,042.1 100.0 CAAG b 14.2% 10.9% 16.1% 21.8% 14.1% Developed Countries 1990 139.6 9.6 586.4 40.4 716.5 49.3 9.7 0.7 1,452.2 100.0 2004 268.2 3.6 2,406.1 32.7 4,624.7 62.9 53.8 0.7 7,352.8 100.0 CAAG 4.8% 10.6% 14.2% 14.1% 12.3% South-East Europe and CIS 2004 20.7 25.2 20.4 24.9 34.3 41.7 6.7 8.1 82.2 100.0 World 1990 163.3 9.2 730.8 41.1 868.1 48.9 13.8 0.8 1,775.9 100.0 2004 440.5 4.6 3,040.1 32.1 5,883.3 62.1 113.1 1.2 9,477.1 100.0 CAAG 7.3% 10.7% 14.6% 16.2% 12.7% a Country groups are those used by UNCTAD. UNCTAD classifies some countries as developing that the World Bank considers “high income,” such as Singapore and South Korea, and classifies some as developed that the World Bank considers “low and middle income,” such as Estonia, the Czech Republic and Hungary. b Compound average annual growth. c South-East Europe and CIS data are included in the world total for 1990, but are not available by sector and industry for that year. SOURCES: Nathan Associates, based on UNCTAD, World Investment Report 2006, Annex Table A.1.2. central to international manufacturing networks; and oil attracts the bulk of Africa’s FDI. INCREASING SHARES OF GLOBAL FDI STOCK Just as the sectoral composition of FDI is chang ing, so too is the distribution of shares in total world inward FDI stock. The latest data suggest that since the beginning of the 1990s, developing countries as a group have increased their share of the world’s inward FDI stock in all sectors. The largest gain has been in primary activi ties, with much more modest gains in services and manufacturing (Table 4-2). In all sectors the rate of growth of FDI inflows to developing countries has exceeded that of inflows to devel oped ones in the last 15 years. This is so despite (almost 63 percent), having grown at the expense of both manufacturing (33 percent) and natural resources (4 percent). The buildup of services FDI in the developing world differs by region. Investment has tended to flow to the wealthier upper-middle income economies, though exceptions exist (e.g., water services in Manila, Jakarta, or Conakry). Services therefore loom largest in the FDI stock of Latin America and the Caribbean and in Europe and Central Asia. In contrast, the major shares of inward FDI stock in East Asia and the Pacific and in Africa are in manufacturing and the primary sector, respectively (Figure 4-1). Such regional differences are logical: services become important as GDP rises; China is 40
Figure 4-1 Estimated Inward FDI Stock by Sector and Region, 2002 Percent 70 60 50 40 30 20 Primary Manufacturing Services 10 0 Developing Countries Africa Note: May not add to totals due to rounding. East Asia and the Pacific Europe and Central Asia Latin America and the Caribbean SOURCE: World Bank, Global Development Finance, Harnessing Cyclical Gains for Development 2004, p. 82. the explosion of FDI inflows into the developed world in last half of the 1990s (Chapter 3, Figure 3-1). MIXED PICTURE AT INDUSTRY LEVEL While growth in developing country inward FDI stock has taken place at the sector level in absolute terms and relative to world stock, the picture at the industry level is more complex. Here the latest UNCTAD data highlight industries whose stock of inward FDI appears to be growing or shrinking over time relative to the size of world FDI inward stock. This in turn provides insights into where the providers of FDI capital may see emerging industry advantages or disadvantages for developing economies in relation to the developed world. The following are key conclusions: Dramatic growth in absolute value. In the 30 plus industries whose inward FDI stock UNC TAD tracks, the developing world—developing countries and transition economies—increased the total absolute value of its inward FDI stock almost sevenfold between 1990 and 2004, from $324 billion to $2.1 trillion. Only one industry—publishing, printing, and reproduction of recorded media—experienced a decrease in absolute value of inward FDI stock. Developing countries’ manufacturing advantage not guaranteed in all industries. In the manufacturing sector as a whole, the absolute value of developing countries’ inward FDI stock climbed from $144 billion in 1990 to $634 billion in 2004, an increase of nearly 340 percent. But since 1990 developing countries appear to have lost share in world FDI stock in several 41
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FOREIGN DIRECT INVESTMENT PUTTING I
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Sponsored by USAID’s Bureau of Ec
Page 6 and 7: 5. Attracting FDI 55 What Foreign I
Page 9: PREFACE Trade and foreign direct in
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Page 20 and 21: Figure 1-1 Net Total Resource Flows
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Page 24 and 25: FDI BY FINANCIAL COMPONENT A foreig
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Page 29 and 30: The Global Factory—Catalyst for E
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Page 45 and 46: Table 3-2 Top Developing Country Re
Page 47 and 48: Three Global Variables in FDI Flows
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ENDNOTES CHAPTER 1 1 United Nations
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in Empirical FDI Studies,” in Doe
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25 See Koji Miyamoto, “Human Capi
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5 WIR 2004, p. 150, for a descripti
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Countries—The Importance of ICT a
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equirement to export a certain prop
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APPENDIX A Data on FDI Flows and St
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Table A-2 Estimated Value of Inward
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Table A-3 Estimated Distribution of
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Table A-4 Developing Countries' Sha
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Resource and Availability UNCTAD. 2
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Resource and Availability Descripti
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Resource and Availability UNCTAD. 2
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Resource and Availability Moran, Th
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Resource and Availability World Ban
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Business linkages. Supplier-produce
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Investment promotion agency (IPA).
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Subnational investment promotion. A
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Putting it to Work in Developing Countries - Nathan Associates

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