Foreign direct investment (and to a lesser extent portfolio equity investment) have been widely heralded as the key benefit that globalization now offers the South and the principal mechanism to kickstart economies into rapid growth. Certainly, this book argues, the 1990s have seen a dramatic increase in foreign capital invested in some developing countries. Equally true, it represents a completely different kind of capital injection from the massive lending by Western banks which led to the debt crisis of the 1980s. But how beneficial is the new wave of foreign investment likely to prove? In this careful and penetrating economic study, David Woodward analyses what is actually happening, its various impacts and just how little we still know about it.
More dramatically, David Woodward shows how FDI may have actually contributed to the Asian financial crisis and could in future lead to a new wave of similar financial crises throughout the developing world. This book raises profound questions about the current euphoria over attracting foreign investment and suggests important new research agendas.
David Woodward is an economist who spent several years working in the British Foreign and Commonwealth Office, including a two year secondment to the IMF and World Bank. In 1986, he resigned to work for the voluntary sector. Since that time he has been an independent economic/development consultant, in which capacity he has done research and writing for UNCTAD, UNDP and the Institute of Child Health, as well as a variety of development NGOs including (amongst others) Oxfam, One World Action, and the European Network on Debt and Development (Eurodad). In 2000 took up an appointment in the Health and Sustainable Development Department of the World Health Organization (WHO).
1. Introduction 2. Capital Flows, Development and Debt Crises 3. The Nature of Direct and Equity Investment and the Positive View 4. Recent Trends in Development Finance 5. Ignorance is Bliss? Data on the Stocks of Direct and Equity Investment 6. Ignorance is Bliss II: Data on Capital Flows, Profits and FDI-Related Trade 7. The Foreign Exchange Dimension: General Principles 8. Foreign Exchange Effects of Direct and Equity Investment on the Host Country 9. Other Effects at the National Level 10. The Global Dimension: Competition for Direct Investment and Export Markets 11. Net Transfers and the Build-Up of Investment Stocks 12. Surges and Cycles 13. Was That It? Direct Investment and Current Account Deficits in the Mexican and Asian Financial Crises 14. Was That It II: Capital Flows of FDI and Equity Investment in the Mexican and Asian Crises 15. Conclusions and Policy Implications Annex I: Data Discrepancies and the Balance of Payments Effects of Direct Investment in Thailand Annex II: Balance of Payments Effects of Direct Investment in Malaysia: Data Limitations and Sensitivity to Assumptions