Understanding FDI-Assisted Economic Development

by Narula; Rajneesh

• ISBN13: 9780415348164
• ISBN10: 0415348161
• Edition: 1st
• Format: Hardcover
• Copyright: 2005-12-16
• Publisher: Routledge

Summary

It is well accepted now that economic growth and development are highly dependent on improving not just the availability of capital, but also the technological capabilities, infrastructure and resources available to (and internalized by) firms, individuals and institutions in any country. Over the last two decades or so, there has been a significant shift away from a inward-looking, import-substituting approach towards a more outward-looking, export-oriented policy orientation. The reasons for this shift are complex, but have to do with developments associated with globalization, trade and debt deficits faced by IS-driven economies, as well as the acknowledged success of the Asian newly industrialized economies (NIEs) in technological and economic 'leapfrogging' within an outward-oriented approach. One of the key features of policy liberalization is the need to attract foreign direct investment (FDI) as a means to acquire or improve technological capabilities through multinational enterprise (MNE)activity. The role of the MNE as an additional source of capital and technology is one of the key features of this new openness, as alternative sources of capital have become scarcer, exacerbated by economic and financial crises. The failure of protected industries in LDCs to become competitive on global markets has highlighted the limitations of the arms-length technology transfer approach. At the same time, the need to build strong local capabilities has not diminished; on the contrary, it has risen as increasingly mobile factors seek strong complementary factors in sites where they will locate. Hence, in recent years, both LDC governments and foreign donors have increasingly come to focus on the role MNEs and FDI can play in development. This has been accompanied by a lifting of many types of regulations that previously limited the role of FDI and MNEs in many developing countries, and a reassessment among donors of the role of public versus private actors in development aid. However,although liberalization has affected the demand for FDI, it has not necessarily always resulted in an increase of FDI inflows. On the other hand, MNEs have an increasingly wide selection of locations available to them, and relatively speaking, the supply of FDI has not increased proportionally with demand. Furthermore, declining trade barriers and restrictions on trade allow MNEs to supply markets without engaging in local production. A large share of FDI continues to be directed to a relatively small group of countries. In the process of embracing FDI as a solution to the myriad of economic ills there is a lack of understanding of the need to develop the necessary domestic capacity to attract, and absorb the spillovers and externalities that derive from, FDI. The importance of foreign investment is now taken as given and little attempt is made to understand the rationale and the costs associated with this policy stance. Simply put, FDI is not a condition sine qua non for development. Too much emphasishas been placed on attracting FDI, and not on understanding how to optimize the benefits for the host economy. This volume aims to encourage and promote research related to these issues. This volume was previously published as a special issue of the European Journal of Development Research.

Table of Contents

Foreign Direct Investment and its Role in Economic Development: Do We Need a New Agenda?	1	(18)
Sanjaya Lall
Rajneesh Narula
Learning, Upgrading, and Innovation in the South African Automotive Industry	19	(34)
Jochen Lorentzen
Justin Barnes
Targeting Winners: Can Foreign Direct Investment Policy Help Developing Countries Industrialise?	53	(32)
Michael Mortimore
Sebastian Vergara
Using Foreign Investment Strategically for Innovation	85	(30)
Lynn K. Mytelka
Lou Anne Barclay
Foreign Direct Investment, Linkage Formation and Supplier Development in Thailand during the 1990s: The Role of State Governance	115	(26)
Laurids S. Lauridsen
Exports and Technological Capabilities: A Study of Foreign and Local Firms in the Electronics Industry in Malaysia, the Philippines and Thailand	141	(37)
Rajah Rasiah
Foreign Direct Investment: A Catalyst for Local Firm Development?	178	(29)
Joanna Scott-Kennel
Where do Foreign Direct Investment-Related Technology Spillovers Come From in Emerging Economies? An Exploration in Argentina in the 1990s	207	(34)
Martin Bell
Anabel Marin
Regulation of Foreign Investment in Historical Perspective	241	(29)
Ha-Joon Chang
Will a Trade and Investment Link in the Global Trade Regime Be Good for Human Development?	270	(21)
Kamal Malhotra
Index	291