Integration Through Foreign Direct Investment

'This book. . . represents a very valuable contribution to the literature on the role of FDI in development in Central and Eastern Europe. It is therefore a must for both scholars and practitioners who are involved in foreign investment in economies in transition.' - Marjan Svetlicic, Transnational Corporations 'The book goes a long way toward understanding a host of key issues related to the emerging pattern of MNC-cum-host collaborative growth in Central and Eastern Europe.' - from the foreword by Terutomo Ozawa, Colorado State University, US This book explores whether foreign direct investment (FDI) can contribute to the competitiveness of industries in Central Europe and to narrowing the gap between these transition economies and countries within the European Union.

Albuquerque, Loayza, and Serven analyze the unparalleled increase in foreign direct investment to emerging market economies in the past 25 years. Using a large cross-country timeseries data set, the authors evaluate the dependence of foreign direct investment on global factors or worldwide sources of risk (that is, factors that drive foreign direct investment across several countries). They construct a globalization measure that equals the share of explained variation in direct investment attributable to global factors. The authors show that the globalization measure has increased steadily for industrial and developing countries. For the full sample of countries, the globalization measure rose eightfold from 1985 to 1999. Furthermore, in recent years developing countries' exposure to global factors has approached that of industrial countries, particularly for Latin America. Finally, the globalization measure correlates strongly with measures of capital market liberalization. Overall, the authors find strong support for the hypothesis of increased market integration which implies a greater role for worldwide sources of risk. They discuss the implications of the results for public policies regarding capital market liberalization and policies directed at attracting foreign investment.This paper - a product of Macroeconomics and Growth, Development Research Group - is part of a larger effort in the group to understand international capital flows.

This title was first published in 2002: Anthony Bende-Nabende focuses on the ongoing globalization process, which has sparked an unprecedented world-wide debate. He provides a one-stop centre for a balanced coverage of the theoretical, empirical and policy issues linking globalization with foreign direct investment, regional economic integration, and economic growth and sustainable development. This stimulating book comprehensively explores the theoretical and empirical literature inter-linking the aforementioned factors from the anti-globalization activists’ viewpoint, and from the pro-globalization proponents’ perspective. It proposes policies that individual countries should pursue, based on the recognition that globalization generates both positive and negative effects. These comprise policies required to maximise the economic benefits globalization may generate, and those that aim to eliminate or at least minimize the negative development-oriented effects globalization may engender and, hence, to propel sustainable development. The book will be an essential guide for students, academics and those involved in international economics, environmental studies, international relations, and growth and development studies.

Integration into the production and marketing arrangements of multinational corporations may offer many benefits to transition economies that, after a long period of isolation, have liberalized trade and investment. The fragmentation of production offers a unique opportunity for producers in developing countries to move from servicing small local markets to supplying large firms abroad and, indirectly, their customers all over the world.

This literature review joins with recent studies in arguing that financial integration must be carefully prepared and managed to ensure that the benefits outweigh the short-run risks. But in contrast with some other studies, it adopts a more skeptical view of the benefits of capital flows other than foreign direct investment.

April 1997 How regional investment agreements affect the flows of foreign direct investment depends on location, the competitiveness of local firms, the motives for investment, and how the agreement affects the policy environment. Blomström and Kokko discuss how regional investment agreements may affect the inward and outward flows of foreign direct investments in the integrating region. After describing the multidimensional character of the issue, they provide a conceptual framework for analysis as well as three case studies focused on different kinds of regional integration: * North-North integration (Canada joining the CUSFTA). * North-South integration (Mexico's accession to the NAFTA). * South-South integration (MERCOSUR). They conclude that the response to an integration agreement will, in each case, depend on the environmental change brought about by the regional investment agreements, the locational advantage of the country or region, the competitiveness of local firms in the integrating region, and the motives for foreign direct investment in and by the country or region in question. The creation of the Canada-U.S. Free Trade Agreement (CUSFTA), for example, had relatively little influence on direct investment patterns in Canada, since much of the trade between Canada and the United States had been liberalized long before the CUSFTA was established. By contrast, the Mexican accession to the NAFTA brought about significant policy changes, which help to explain foreign multinationals' increasing interest in the country. Similarly, the establishment of the MERCOSUR Common Market is likely to significantly affect the region's policy environment, which suggests that it may have a notable (although varying) impact on foreign direct investment in the four member countries. This paper - a product of the International Trade Division, International Economics Department - is part of a larger effort in the department to study regionalism and development.