Fdi human capital and education in developing countries defining a research methodology
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FDI, Human Capital and Education in Developing Countries: Defining a Research Methodology. Ki Fukasaku Paris, 1 4 December 2001. What type of FDI?. Natural resource extraction Manufacturing Services (telecom, power, transport, etc) Green-field M&As Privatisation.

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Fdi human capital and education in developing countries defining a research methodology

FDI, Human Capital and Education in Developing Countries: Defining a Research Methodology

Ki Fukasaku Paris, 14 December 2001


What type of FDI? Defining a Research Methodology

  • Natural resource extraction

  • Manufacturing

  • Services (telecom, power, transport, etc)

  • Green-field

  • M&As

  • Privatisation


Factors affecting fdi inflows
Factors affecting FDI inflows Defining a Research Methodology

  • Fundamentals

  • Local thresholds

    • skills, technological capability, capital markets etc.

  • Host-government policies

    • incentive-based measures, rules-based measures (e.g. RTAs)

    • general vs. sector-specific policies



Net fdi source and recipient countries billion three year average 1998 2000
Net FDI Source and Recipient Countries States, 1986 and 2000($Billion, three year average 1998-2000)


Net fdi source and recipient countries billion three year average 1991 1993
Net FDI Source and Recipient Countries States, 1986 and 2000($Billion, three year average 1991-1993)


Benefits of fdi for host countries
Benefits of FDI for Host Countries States, 1986 and 2000

  • FDI brings financial resources for domestic capital formation.

  • FDI increases production, employment and trade, quantitatively and qualitatively.

  • FDI transfers technologies, hard and soft.


Technological spillovers
Technological Spillovers States, 1986 and 2000

  • Intra-firm (from parents to foreign affiliates)

  • Intra-industry (from FAs to local firms in the same industry)

  • Inter-industry (vertical linkages)

  • Labour turnover (“training ground”)


Fdi and technology transfer 1
FDI and technology transfer (1) States, 1986 and 2000

  • Intra-firm technology transfer: the host-country conditions matter (e.g. income level, past experience on industrialisation - Urata-Kawai 2000)

  • Efficiency gains from technological spillovers to local firms would not occur automatically.

  • Competition matters in local markets (Okamoto, 1999)


Fdi and technology transfer 2
FDI and technology transfer (2) States, 1986 and 2000

  • Blomström-Persson (1983, Mexico 1970)

  • Haddad-Harrison (1993, Morocco 1985-89)

  • Blomström-Sjöholm (1998, Indonesia 1991)

  • Kokko et al. (1996/2001, Uruguay 1988)

  • Aitken-Harrison (1999, Venezuela 1976-89)

  • Djankov-Hoekman(1999, Czech, 1992-96)

  • Haskel et al. (2001, UK 1973-92)


Fdi and technology transfer 3
FDI and technology transfer (3) States, 1986 and 2000

  • Both relative and absolute technological capabilities - Perez (1998, Italy 1989-91)

    Foreign presence affects positively the productivity growth of domestic firms in specialist and scale-intensive sectors (e.g. chemical, machinery, metal, automobile), but not in science-based sectors (e.g. pharmaceutical, IT/electronic).


Host government policies 1
Host-government policies (1) States, 1986 and 2000

  • The importance of host-government policies for attracting FDI and reaping full benefits associated with FDI is clear.

  • Motives of foreign investors and host-country “fundamentals’

  • Costs of investment incentives


Host government policies 2
Host-government policies (2) States, 1986 and 2000

  • A comparative survey of FDI regimes in Asia and Latin America

  • Legal and policy framework for FDI appears to be more open in Latin America than in Asia.

  • Wide differences across countries in Asia in terms of control at the entry phase and negative lists as well as the approach to IPRs


Main conclusions 1
Main conclusions (1) States, 1986 and 2000

  • Host-government policies matter.

  • More discussion is needed as to how policies work (or do not work).

  • Traditional incentive-based measures are costly for developing countries facing severe resource constraints.


Main conclusions 2
Main conclusions (2) States, 1986 and 2000

  • The establishment of a multilateral framework of rules on FDI helps increase the collective welfare of host countries (prisoners’ dilemma).

  • A regional approach to taking more constructive, rules-based policies to FDI: EU, NAFTA, MERCOSUR, FTAA, ASEAN Investment Area, APEC.


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