Investment practices by multinationals are undergoing major changes. This is an important trend in the world economy, since direct foreign investment (DFI) has been the principal engine of growth for nations at all stages of development in recent years. When the dust settles, say many experts, only a select group of LDCs (less developed countries), NICs (newly industrializing countries), and industrialized countries will attract capital in the way they have during the past four decades.
This is an important, yet seldom-discussed trend. Foreign investment in overseas plants, factories, and other corporate facilities has recast entire regions (such as East Asia's consumer electronics industries). It has ushered in tremendous forces of social change (as in Africa), and remains the cornerstone of many national economies (ranging from the Caribbean and South America to the Middle East). This torrent of capital, innovations, and technology emanating from advanced nations harnessed other forces throughout the globe, leading to ever-greater wealth and often the eradication of endemic poverty. DFI channeled to points offshore has, in a few years, left the world with ribbons of roadways, altered the concept of work itself in the Third World, and forged links across oceans that were unimaginable a generation ago.
A profound shift is occurring in the saga of offshore investment. "A lot of countries are worried about their continued ability to attract funds," according to C. Fred Bergsten, president of the Institute of International Economics. Parris Chang, director of the East Asian Studies Center at Penn State University, agrees, but believes that "not all countries will suffer." This is because "some spots in Asia still attract [investment] because they are both a large market and are stable."
The amounts of DFI slated for all developing countries are slowing down at the same time America's role is dropping from nearly 80 percent in the 1960s to an estimated 45 percent last year. Japan has taken the mantle for strategic and economic considerations, while a whole breed of new players is active. For all of these players, many traditional reasons for both abstaining from and participating in the offshore plunge are changing.
Even as this slowdown is taking place, the numbers remain staggering. According to sources such as the United Nations Center on Transnational Investment, the combined value of worldwide offshore investment may be as high as $950 billion. The center estimates that over a third of all global trade is carried out by transnational and multinational corporations (MNCs), whose role in DFI greatly overshadows government and multilateral aid programs.
As recently as 1984, nearly $60 billion was channeled into plants in developing countries. Probably 20,000 MNCs were responsible for that surge of DFI. By 1987-88, though, according to John Dunning, the amounts tumbled to less than $45 billion "and it may be leveling off substantially." Dunning, the author of many books and often regarded as the premier authority on DFI, concedes that accurate current data is difficult to obtain. Yet, statistics as well as a number of economic events do lead to certain conclusions about what is taking place, and why.
Why The Downfall?
One
...
Read Full Article
|
