THE HOME COUNTRY EFFECTS OF FDI IN DEVELOPED ECONOMIES

This paper surveys the effects of outward foreign direct investment on the developed home countries of multinational corporations. The focus is on the production interactions arising from outward investment – what is the impact on home country exports and production structure – but the paper also discusses effects on investment, the balance-of-payments, technology and knowledge, and political decision-making in the home country. The main conclusion is that outward FDI is beneficial to the investing firm, but that the effects on the home country vary depending on the characteristics of the investment project and the business environment in the home and host countries. In most cases, there is only a small impact on total exports and production in the developed home countries, but the net effect on employment may be mildly negative. This is related to a shift in production structure, whereby labor intensive activities are outsourced to host countries with lower wage levels, and more advanced operations are kept at home. Most home countries encourage outward investment, but the fear for negative effects (particularly on the balance-of-payments) has at times motivated restrictions on FDI. The final part of the paper discusses effects on developing home countries, and notes that these are likely to coincide with the effects on developed home countries. One exception is technology-sourcing investments, which may be more important than in developed home countries, and which may, at least in theory, provide an alternative to inward FDI as a source of technology for the more advanced developing economies.FDI; MNCs; home country effects

The Swedish Model

The main characteristics of ‘the Swedish model’ are arguably related to the country’s knowledge-intensive industry and its advanced welfare state. The purpose of this paper is to discuss the historical development of these two features of the Swedish economy. The first part looks at industrial development, highlighting both the reasons for the rapid industrialization in the late 19th century and the subsequent shift from raw materials to human capital and knowledge as the main competitive advantages. The second part turns to the development of welfare state, stressing the gradual increase in benefits and coverage as well as the emphasis on universal rather than means-tested benefits. The final part suggests some policy conclusions for today’s developing countries and emerging economies.Sweden, industrialization, welfare state

The Economics of Foreign Direct Investment Incentives

This paper suggests that the use of investment incentives focusing exclusively on foreign firms, although motivated in some cases from a theoretical point of view, is generally not an efficient way to raise national welfare. The main reason is that the strongest theoretical motive for financial subsidies to inward FDI spillovers of foreign technology and skills to local industry is not an automatic consequence of foreign investment. The potential spillover benefits are realized only if local firms have the ability and motivation to invest in absorbing foreign technologies and skills. To motivate subsidization of foreign investment, it is therefore necessary, at the same time, to support learning and investment in local firms as well.

Human Capital and Inward FDI

After a review of the literature, we conclude that there is potential for significant “spillover effects” from FDI into host countries. However, we identify some limitations of this potential to do with the stock of human capital, the interest in local firms of promoting skills transfer and the competition environment. We suggest comparing conditions and effects between regions, particularly between East Asia and Latin America, where transfer in the former has been more consistent than in the latter. We propose further that an analysis of the type of FDI flowing to different regions and countries could provide clues to the potential for maximising the gains to local skills accumulation. Finally, studies are needed which examine the nature of skills provided by FDI, and ways in which training institutions, business schools, for example, can complement in-service training by firms in FDI host countries.MNCs; FDI; Spillovers

THE STATE AND THE PRIVATE SECTOR IN VIETNAM

In recent years, the Vietnamese government has emphasized its commitment to create a fair business environment for both the state and non-state sectors in its medium and long-term economic development programs. This paper examines the development of the private sector in Vietnam, focusing in particular on the relationship between the state and the private sector. The first part of the paper reviews the trends in private sector development, the second part discusses obstacles for private sector development, with focus on the role of state-owned enterprises, and the third part discusses future challenges and suggests some policy reforms on the basis of the lessons from the first two decades of economics reforms in Vietnam, as well as international experiences. The paper also considers the pattern of new firm establishment, including the impact of foreign investment on the domestic private sector.Vietnam; economic reforms; private sector development; SOEs

POVERTY AND LAND POLICY IN CAMBODIA

Slow agricultural development has restrained economic growth and poverty alleviation in Cambodia. The country's volatile history has left a legacy of weak tenure security and large areas of underutilized land. This study estimates the impact of access to land on poverty in a logistic regression framework using household survey data. Increased access to land is shown to significantly lower the risk of household poverty. Tenure security, land improvements and irrigation strengthens this effect. Simulations of the potential impact of a land reform package predicts a 16 percentage points fall in poverty incidence among landowning rural households and a 30-point fall when targeting the landless. The analysis suggests that improved tenure security should be at the top of the policy agenda. Given political and economic constraints, implementation of reforms remains a key challenge.Cambodia; Economic Development; Poverty; Property Rights; Land Reform

Home Country Effects of Foreign Direct Investment: Evidence from Sweden

This paper examines two broad issues related to foreign investment by Swedish multinationals: first the effects of outward foreign direct investment on domestic investment, exports, and employment, and second, the effects on the domestic economy from the increasing division of labor between the parents and foreign affiliates of Swedish MNCs. The paper summarizes and synthesizes the existing empirical evidence on these matters (much of which has hitherto only been available in Swedish) and discusses some possible long run effects that have not received much attention in the literature.

Cultivated sweet rowanberries have high phenolic content and antioxidant capacity

Cultivation of sweet rowan was started in Kuopio in 1990 when various cultivars and hybrids adapted to nothern climates were planted in the University Botanical Garden. All the cultivars have high antioxidant and phenolic content. The phenolic profile and high antioxidant capacity make the rowanberries potentially very interesting sources of preservatives and colouring agents for the food processing industry