Inward FDI in Austria and its policy context, 2010

Since World War II, inward foreign direct investment (IFDI) has played an important role in Austria, contributing substantially to overall investment. Austria's IFDI stock increased every year except in two. The most recent decline occurred in 2008 as a result of the economic and financial crisis. In fact, valuation adjustments led to a fall of the country's IFDI stock by 4%. Yet, in real terms, as measured by employment, IFDI rose even during 2008, and projections for 2009 suggest renewed growth of the country's IFDI stock. This short Profile highlights a number of stylized facts on IFDI and describes the country's FDI policy environment

Productivity and Labour Demand Effects of Inward and Outward FDI on UK Industry

We relate the technological and factor price determinants of inward and outward FDI to its potential productivity and labour market effects on both host and home economies. This allows us to distinguish clearly between technology sourcing and technology exploiting FDI, and to identify FDI which is linked to labour cost differentials. We then empirically examine the effects of different types of FDI into and out of the United Kingdom on domestic (i.e. UK) productivity and on the demand for skilled and unskilled labour at the industry level. Inward investment into the UK comes overwhelmingly from sectors and countries which have a technological advantage over the corresponding UK sector. Outward FDI shows a quite different pattern, dominated by investment into foreign sectors which have lower unit labour costs than the UK. We find that different types of FDI have markedly different productivity and labour demand effects, which may in part explain the lack of consensus in the empirical literature on the effects of FDI. Our results also highlight the difficulty for policy makers of simultaneously improving employment and domestic productivity through FDI

Inward FDI in Portugal and its policy context, 2011

Portugal's performance in attracting inward foreign direct investment (IFDI) during the economic and financial crisis in 2009 was poor, below the low figures that it had already recorded in the previous couple of years, although Portugal did not record negative FDI inflows like competing countries such as Ireland (in 2008) and Hungary (in 2009). The country's difficulties in attracting IFDI are, however, structural. The "golden" years of the early 1990s, when Portugal emerged as an attractive and fashionable location, are past. The country's IFDI performance throughout the first decade of the 21st century was, in general, weak. In 2009, Spain, France and Brazil were the main sources of IFDI in Portugal. In spite of the Government's commitment to attracting IFDI, policy design and implementation have fallen short in the increasingly fierce competition for international investment

India’s Outward Foreign Direct Investment: Closed Doors to Open Souk

Abstract: Spectacular liberalisation of trade and investment policies opened the floodgate of capital flows in and out of India from the mid 1990s. This colossal capital flows facilitated the rapid economic growth and raised the country’s profile as one of the super powers in the region. The recent surge of outward foreign direct investment (OFDI) from India has a significant balance of payments as well as enormous socio economic effect in securing the country’s position as a new economic power in the global context. Since the study on the OFDI is sparse, this paper attempts to contribute to the literature by examining the major determinants of OFDI from India using the cointegration and Vector Error Correction Model over 1970 and 2009. The results of our study indicate that the dramatic financial and trade liberalisation has instigated the gigantic outflow of investment and acquisition by India’s firms. Furthermore, the domestic economic environment including the growing human capital stocks, increasing international competitiveness, large influx of inflow of foreign capital and increased domestic savings are positively and significantly influencing India’s huge outward capital flows in recent decade. However, improvement in domestic technological capabilities, rising standard of living and increased interest rates are deterrents to the OFDI of the country in the long run. Granger causality test also indicates that while all the above mentioned independent variables are Granger causing OFDI, nevertheless, outward FDI does not Granger cause any of the factors determining the OFDI from India.Keywords: Inward FDI, Outward FDI, Economic Growth, India, Cointegration, VECM, Endogeniety test, Granger Causality Test

Inward FDI in Indonesia and its policy context

Inward foreign direct investment (IFDI) in Indonesia has been an important element of the country's economic development process. Following the introduction of the first foreign direct investment (FDI) law early in the 'New Order' era (1966-1998), IFDI flows to Indonesia were relatively large. Indonesia was hit hard during the Asian financial crisis in 1997-1998, when net IFDI inflows fell sharply. In the first half of 2004, IFDI started to grow again. Indonesia still faces some uncertainties relating to the implementation of regional autonomy and to the high costs of running businesses caused by inadequate infrastructure, restrictive labor regulations and corruption. Nevertheless, the availability of vast reserves of highly diversified natural resources, a huge domestic market potential, a cheap labor force, and continued reforms in the direction of a market-based economy, including privatizations and open access to almost all sectors, are likely to boost IFDI

The investment development path in a globalised world: implications for Eastern Europe

This article summarises recent revisions to the investment development path (IDP) as postulated by Narula and Dunning (2010). The IDP provides a framework to understand the dynamic interaction between foreign direct investment (FDI) and economic development. The revisions take into account some recent changes in the global economic environment. This paper argues that studies based on the IDP should adopt a broader perspective, encompassing the idiosyncratic economic structure of countries as well as the heterogeneous nature of FDI. It is critical to understand the complex forces and interactions that determine the turning points in a country’s IDP, and to more explicitly acknowledge the role of historical, social and political circumstances in hindering or promoting FDI. We discuss some of the implications for Eastern European countries and provide some guidelines for future research. Key words: FDI, investment development path, Eastern Europe, multinational enterprises, transition

Inward FDI in Finland and its policy context

From independence to the collapse of the Soviet Union, inward foreign direct investment (IFDI) in Finland was either marginal (1917-1939) or insignificant (1945-early 1990s). Throughout this period, the success of Finland's core production clusters in forestry, metal engineering, chemicals, and plastics was based on exports, not IFDI (or outward FDI). However, with the end of the Cold War and the globalization of Finnish industries (especially the mobile communications cluster) in a period of strong export-led economic growth, IFDI in Finland took off rapidly from the mid-1990s. This period of growth came to an end with the global crisis of 2008-2009. In 2009, the Finnish economy shrank roughly by 8%, the sharpest plunge since the country's civil war in 1918. The recovery since 2010 has been relatively strong in comparison to that in most European Union (EU) economies, but Finland remains vulnerable to the Eurozone crisis. Today, IFDI is seen as an untapped resource, and the Finnish Government hopes to develop an IFDI promotion strategy in cooperation with the private sector and integrated with the national innovation system

Inward FDI in Italy and its policy context

2The attractiveness of the Italian economy for inward foreign direct investment (IFDI) has been traditionally limited, despite the country's locational advantages such as a large domestic market and a skilled labor force. The recent global crisis worsened the country's IFDI position, with flows falling from US$40 billion in 2007 to US$ 11 billion in 2008 before recovering to US$20 billion in 2009 but down again to US$ 9 billion in 2010. Although the country's IFDI stock had grown since 2000 at a rate similar to that of the European Union as a whole, in 2010 IFDI stock contracted vis-à-vis 2009, reflecting how Italy, compared to other key European countries and to its own potential, continues to underperform. The main obstacles to exploiting the country's potential for IFDI lie both in the largely insufficient actions undertaken to attract and promote IFDI, and especially in the lack of coordination with other relevant policy measures (e.g. infrastructure development) within a broader framework aimed at regional and national development.openopenMutinelli M.; Piscitello L.Mutinelli, Marco Alberto; Piscitello, L

Inward FDI in Indonesia and its policy context

Inward foreign direct investment (IFDI) in Indonesia has been an important element of the country's economic development process. Following the introduction of the first foreign direct investment (FDI) law early in the 'New Order' era (1966-1998), IFDI flows to Indonesia were relatively large. Indonesia was hit hard during the Asian financial crisis in 1997-1998, when net IFDI inflows fell sharply. In the first half of 2004, IFDI started to grow again. Indonesia still faces some uncertainties relating to the implementation of regional autonomy and to the high costs of running businesses caused by inadequate infrastructure, restrictive labor regulations and corruption. Nevertheless, the availability of vast reserves of highly diversified natural resources, a huge domestic market potential, a cheap labor force, and continued reforms in the direction of a market-based economy, including privatizations and open access to almost all sectors, are likely to boost IFDI

Inward FDI in Germany and its policy context

With a stable economic and political system, open capital markets, the largest domestic market in Europe, and European Union (EU) membership, Germany has attracted competitive and export-oriented multinational enterprises (MNEs) since the 1960s. In the 1990s—after German unification and the opening up of Eastern Europe—inward foreign direct investment (IFDI) grew more slowly than expected despite the increased market potential. In recent years, the German economy strengthened and the wage and cost gaps against its main competitors narrowed, contributing to higher IFDI. With the financial and economic crises, German IFDI declined considerably in 2008 but started to rise again in 2009. At the end of 2008, Germany ranked among the top four developed countries as host for IFDI. Germany's open investment regime was tightened in 2009, in reaction to the emergence of sovereign wealth funds (SWFs)