Global Players from Emerging Markets: Strengthening ... - Unctad

network, ensure better control of value chain and
access to markets in Latin America. Argentine SMEs
such as software industry enterprises Idea-Factory,
Cubika and Sistemas Estratégios S.A., and industry
and agricultural machinery SMEs such as Plà and
Metalfor, have also invested abroad, mainly in the
region. Brazilian firms such as Petrobras (oil and
energy), Odebrecht (construction), Gerdau (steel) and
Ambev (beverages) invest abroad to enhance their
capabilities and market reach. 4
Enterprises from Africa are less internationalized
and those that have invested abroad are
usually within the region. OFDI from the African
continent rose from $20 billion in 1990 to $54 billion
in 2005, but the pace of growth has been much slower
compared with the 10-fold increase in Asia. Improved
investment environment in host countries, regional
integration, improvements in regulatory environment
for OFDI and emerging investment opportunities
(privatization) in Africa facilitated the emergence
of regional investors. South Africa is the largest
investor in the region, accounting for over 70 per
cent of the region’s OFDI stock in 2005. Most of the
enterprises that have internationalized are large firms
such as AngloGold Ashanti (gold production), Illovo
Sugar (sugar production), Mondi (paper production),
Steinhoff (furniture manufacturing) and the MTN
group (cellular phone services). Small- and mediumsized
South African enterprises such as Spanjaard
Ltd., Metorex and DPI Plastics have also invested
abroad.
Enterprises from the transition economies
are also engaged in OFDI (Andreff 2003). Since
the 1990s, most OFDI in the region came from the
Russian Federation, which invested in energy- and
mining-related industries, including gas and oil
refining and distribution. Major investors include
Lukoil, Gazprom, Novoship, Norilsk Nickel,
Primorsk Shipping Corporation and the Far East
Shipping Company. Russian SMEs have also invested
abroad in neighbouring countries and Europe in IT
and telecommunication activities. For instance, the
LCS Group (IT) has invested in the United Kingdom
as part of its corporate expansion and market access
strategy. Galaktika (also IT) has done the same by
investing in the Commonwealth of Independent
States (CIS) markets.
Sectoral distribution. The industries where
OFDI by developing country firms are most
prominent include oil, gas and mining. OFDI in
natural resources is significant for some economies,
4 Ambev has established a “trans-Latin” network of beverage and
food production, and recently concluded a deal with Interbrew
to create a new global brewing and beverages giant, InBev AS,
based in Belgium.
CHAPTER I 3
such as Argentina, China, Chile, India, Malaysia,
the Russian Federation and Turkey. Manufacturing
industries such as electrical, electronics, information
technology, food and beverages are also important. In
services, telecommunication, transport, utilities and
tourism-related activities are key sources of OFDI.
Types of enterprises. Government linked
companies (GLCs) contributed significantly to
enterprise internationalization in some countries (e.g.
Malaysia, China, Russian Federation, Singapore).
Their size, financial resources and public status
facilitated their internationalization as compared with
the non-GLCs, in particular SMEs.
C. Drivers and motivations of
OFDI
The economic literature identifies two waves
of OFDI: the first was during the 1960s and 1970s,
and the second from the 1980s onwards. During
the first wave, firms were driven abroad mainly by
efficiency and market-seeking factors (identified in
literature as push factors 5 ); their investments were
mainly directed towards other developing countries,
often to neighbouring countries, and were dominated
by firms from Asia (India, the Republic of Korea,
Hong Kong (China), Malaysia, Singapore) and Latin
America (Argentina, Brazil, Mexico). The second
wave was more strategic-asset-seeking and driven
by a combination of “pull” and “push” factors (with
pull factors dominating). During the second wave,
developing country firms invested more in developed
countries and other developing countries outside their
own region. Hong Kong (China), Taiwan Province of
China, Singapore and the Republic of Korea were the
main players (Dunning et al. 1996).
A key driver of OFDI is competitive pressure.
In a rapidly globalizing world, companies can no
longer count on their home markets as a relatively
secure source of profits. Competition from foreign
firms is everywhere – through imports, inward
FDI and non-equity forms of participation. These
conditions make it all the more important for firms
to pay attention to their competitiveness, and OFDI
can influence and even be a dominant factor for the
growth and success of businesses (Sauvant 2005,
p. 16). Another significant driver is the improved
5 “Push” factors relate to economic environments in the home
country as well as corporate strategies that encourage firms to
go abroad. They include saturated home markets, currency
appreciation, cost disadvantages, limited land, limited labour
supply, and the need to follow competitors and suppliers. “Pull”
factors relate to location-specific advantages of the host countries
such as market potential, low-cost labour, incentives, investment
opportunities, technology and skills.