Foreign direct investment in Southeast Asia: - Regional Office China

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Recent years have seen increasing competition between countries to attractand host finite FDI flows. But the challenge for policy-makers is not justabout attracting a greater share of FDI inflows, but also harnessing it tooptimal effect. International experience provides some lessons on optimalpolicy designs and instruments (and their implementation). However, thetopic remains the subject of continuing and continual research and analyses,not least because FDI activity itself (both in manufacturing and services) is ina state of permanent evolution and change. For example, the steady rise ofglobal value chains and global production networks, briefly depicted above,has become an increasing source of interest. For policy-makers, the keyquestion is: how can a country best position itself to take advantage of thisnew phenomenon? While policy instruments that proved effective inattracting and harnessing FDI yesterday may prove less effective today (andtomorrow), new instruments may be part of the answer.It is in this context that a UNIDO expert group meeting (EGM) wasconceptualised and conducted; using the experience of Southeast Asia as alens through which to depict and debate the challenges currently confrontingdeveloping countries in successfully attracting and best harnessing FDIinflows. The Southeast Asian region spans a diverse range of countries, atvery different stages of economic development and transition, and thereforeserves as a useful object of study for most developing countries [Freemanand Bartels (2004)]. This report is intended to serve as a summary of theEGM’s presentations and discussions.10
Theme 1FDI and Multinational Enterprises in Southeast Asia:Globalisation’s ChallengesPresentation summaryProviding a robust platform on which the topic of FDI in Southeast Asia canbe explored, Peter Buckley provided a ‘long view’ perspective of global andregional FDI activity. He introduced the notion of multinational enterprises(MNEs) as global networks, seeking to “circulate mobile inputs globally, tocombine with locationally fixed factors”. The primary motives for FDI byMNEs can be categorised as seeking to gain: i) market access; ii) access toimmobile inputs, such as raw materials like oil; and iii) access to immobileresources, such as competitive labour inputs and tax rates. The role of MNEsis to circulate mobile inputs across the globe, so as to combine them mosteffectively (and efficiently) with these immobile factors. This results in theformation, co-ordination and movement of various operations and functionswithin an MNE, distributed across countries. And can be likened to that of an‘integrated global factory’. See Figure 1, below.THE INTEGRATED GLOBAL FACTORYDISTRIBUTED OPERATIONS & SPATIALLY COINTERNATIONAL& INTRA-REGIONALBORDERSLow-TechPartsSupplierM ed-TechPartsSupplierCO-ORDINATED FUNCTIONSHi-TechPartsSupplierFTZsDesignEngineeringBrandingM arketingBRANDOWNEREngineeringContractorR&DContractorDesignContractorBPOLow-tech PartsSupplierHi-TechContractAssemblerM ed-TechContractAssemblyOutsourcedParts SupplierM ed-Tech PartsSupplierFinal Assembly,Adaptation,Warehousing,Distribution&LogisticsLOCALMARKETCORE, NON- CORE FUNCTIONSDISTRIBUTED MANUFACTURINGADAPTATIONINTEGRATED TEGRATED INTERNATIONALAL SOURCING, TECHNOLOGY, PRODUCTION, MARKETING& SERVICINGNETWORK OPERATIONSFigure 1: The integrated global factory. Adapted from Buckley (2003); Buckleyand Ghauri (2004).In terms of product classification, and therefore global value (or supply)chains, each MNE may have several global factories, some of which may3PL3PL11
Page 3: Foreign Direct Investment in Southe
Page 7 and 8: PrefaceThis UNIDO report presents t
Page 9 and 10: PreambleWithin the constantly evolv
Page 11: IntroductionThe Changing Face of Fo
Page 15 and 16: These include: i) changes in long-t
Page 17 and 18: quality of life in a country can be
Page 19 and 20: consequence, as well as in terms of
Page 21 and 22: high-technology cluster development
Page 23 and 24: Theme 3FDI, Boundaries, Hierarchies
Page 25 and 26: A second dimension is that incentiv
Page 27 and 28: industrial sector and sub-sector le
Page 29 and 30: industrial base without relying to
Page 31 and 32: socialising public goods and privat
Page 33 and 34: Typically, but not exclusively, Sin
Page 35 and 36: generate tax revenues to fund vario
Page 37 and 38: cumulatively serving to constrain F
Page 39 and 40: Southeast Asia as an integrated mar
Page 41 and 42: Theme 5FDI and Capital in Southeast
Page 43 and 44: Finally, there is also a need for i
Page 45 and 46: components of the integrated global
Page 47 and 48: ConclusionEmerging Policy Direction
Page 49 and 50: In conclusion, Frank Bartels sugges
Page 51 and 52: Taking the above research needs int
Page 53 and 54: Annex 1:Presenters at the EGMName P
Page 55 and 56: TIMOR LESTEMs. Warubon SUKASAMEMr.
Page 57 and 58: 14:00 - 15:30 Theme II: Intra-regio
Page 59 and 60: y Japan ITPOsCommentator: Frank L.
Page 61 and 62: This type of deep information excha
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The extent of FDI effects and their
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Appendix IV: Opening Statement by U
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only of UNIDO but also other UN spe
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LIST OF ABBREVIATIONSAFTA - ASEAN F
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in mind that host policy for attrac
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forces of competition and co-operat
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2. BACKGROUND ISSUESAn accurate per
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economies. In contrast, Sub-Saharan
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costs, boost quality and accelerate
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Fourthly, in terms of a framework f
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in joint venturing), while retainin
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experiencing the kind of global rel
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other hand, being predominantly nat
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Also, the trade surplus (or deficit
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limited [Freeman and Bartels (2000)
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technology and innovation policy; h
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Credit Information Index NA 0 3 0 6
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Appendix II - Investment climate in
Page 99 and 100:
REFERENCESAlmor T., Hirsch S., 1995
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Freeman N. J., Bartels F. L., Eds.,
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Trigeorgis L., 1996, Real Option: M
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Foreign direct investment in Southeast Asia: - Regional Office China

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