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Financial Effects of Foreign Direct Investment in the Context of a Possible WTO Agreement on Investment (No. 21)

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USD 6.00 Publisher: TWN
ISBN: 983-2729-04-1
Year: 2003
No. of pages: 28
Size of book: 16.5cm x 24cm
Author: David Woodward
About the Book

This paper presents a graphical presentation of the increasing flows and accelerating build-up of the stock of foreign direct investment in developing countries, and its likely financial effects in the long term.

It argues that the stock of inward investment, which has reached unprecedented levels, is equivalent to a large foreign debt at a very high interest rate; that it will have a strong negative impact on host countries’ balance of payments over the long term; and that this effect was a major factor underlying the 1997 financial crisis in some South East Asian countries.

The paper concludes by emphasising the importance of selective policies towards FDI as a means of limiting the adverse financial effects, and warns of the danger that a WTO Investment Agreement will take away the policy space developing country governments need to manage FDI flows prudently.


About the Author

DAVID WOODWARD is an independent development economist.  He has previously worked as an economic adviser in the British Foreign and Commonwealth Office, as technical assistant to the British Executive Director at the IMF and World Bank, and most recently as development economist in the Strategy Unit of the World Health Organisation.  He has also written on a wide range of development issues for non-government organisations, UNDP, UNCTAD and the Institute of Child Health (University of London).  He is the author of Debt, Adjustment and Poverty in Developing Countries (London: Pinter Publishers/Save the Children (UK), 1992), and The Next Crisis?  Direct and Equity Investment in Developing Countries; and co-editor of Global Public Goods for Health: Health Economic and Public Health Perspectives (Oxford: Oxford University Press, forthcoming).


Contents

1. Introduction

2. The Background: Financial Flows to Developing Countries
Figure 1: Grants and Loans to Developing Countries, 1970-2000
Figure 2: Financial Flows to Developing Countries, 1970-2000
Figure 3: FDI Inflows as a Proportion of Total Investment, 1990-95 and 1999-00
Figure 4: Inward FDI Stock as a Proportion of GNP, 1980-2000

3. Financial Effects of FDI: The Simplified View

4.Financial Effects of FDI: A More Complete View
Figure 5: A Framework for Analysis of the Financial Effects of FDI
Figure 6: Financial Effects of FDI: A Balance Sheet
Figure 7: Share of Exports in Total Output of US Majority-Owned Foreign Affiliates, 1993: By Regions
Figure 8: Share of Exports in Total Output of US Ma.jority-Owned Foreign Affiliates, 1993: By Countries

5. FDI and Financial Crises
Figure 9:   Contribution of FDI to Pre-Crisis Current Account Deficits (Simplified View)
Figure 10:  Malaysia: Trade Deficit of FDI Enterprises, 1990-96
Figure ll: Malaysia: Current Account Deficit of FDI Enterprises, 1990-96
Figure 12:  Malaysia: Current Account Deficit with and without FDI-Related Transactions, 1990-96
Figure 13:  Malaysia: FDI-Related Current Account Deficit and FDI Capital Inflows, 1990-96

6.   Summary and Conclusion

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This product was added to our catalog on Wednesday 18 January, 2012.


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