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By Ashwin HemmathagamaForeign Direct Investment [FDI] flows to and from the developing countries in Asia hit record levels last year, according to World Investment Report [WIR] 2001 released yesterday by the United Nations Conference on Trade and Development [UNCTAD]. It said although trends are mixed, the region’s longer-term investment prospects remain “bright” and cited the equal quality of the underlying determinants for FDI and greater economic integration. The record US $ 143 billion inflows – a 44% increase over 1999 was primarily due to an unpredicted FDI boom in Hong Kong, China. With US $ 64 billion inflows it overlooked mainland China as the single largest FDI recipient in Asia, and was also the top source of outward FDI, with US $ 63 billion, although FDI from China and India is also rising. This year’s theme of WIR is “Foreign Direct Investment [FDI] and the role of Trans National Corporations.” Since 1993 UNCTAD has been looking at the interests of developing countries given the total responsibility of focusing of international trade, foreign related investment and the work of transnational corporations. The Board of Investment of Sri Lanka [BOI] Deputy Director General - M. P. T. Cooray said: “The book covers all the areas in the countries which plan to attract foreign investment.” The report touches on two basic areas, the flow of foreign direct investment during 2001 compared with year 2000 and 1999 and tries to map up the flows of occurrence the host countries are concerned with. It also analyses the role of the Trans National Corporations [TNCs] in the flow of the foreign direct investment and gives the idea how to maximise the benefits from the direct foreign investments. In the area of direct foreign investment inflows and outflows the report clearly analyses that its tremendous growth compared with year 1999. It also analyses that FDI inflows are concentrated in regional areas. 65% to 75% of FDI flows between developed nations like USA, UK, Japan and European Union. Mr. Cooray said that: “We in Sri Lanka talk about FDI as equity investments or shareholders’ funds. But the total FDI comprises of mergers and takeovers, privatisation activities etc. In international terms now we are talking about mergers, acquisitions, takeovers and privatisation. Out of the recipient countries UK has become the largest recipient country. The interesting fact is that developed countries are receiving the lion’s share of the transactions. It is clearly identified both by the developed and the developing countries that the FDI has become the most important tool for the clear vision of more and more activities.” He said that the most important of all is that the report shows if the less developed countries and the developing countries are to maximize the benefits of FDI there is a need to develop all the local entrepreneurs by making suitable linkages with the TNCs. The WIR 2001 said: “As FDI assumes growing importance in the globalising world economy, countries are increasingly concerned with maximising its benefits. For developing countries, one of the most effective ways to do this is to promote linkages between foreign affiliates and domestic firms, which provide the strongest channel for diffusing skills, knowledge and technology.” The report looks at the positive impact of linkages on development and the policy challenges of how to promote linkages.
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