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| Sunday, 2 October 2005 |
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Hard work vital to attract FDI by Surekha Galagoda Sri Lanka has the potential to attract Foreign Direct Investment(FDI) even in this competitive environment but we have to work hard, said Executive Director (Research) BOI Dr Nihal Samarappuli at the launch of the World Investment Report 2005 titled "Transnational Corporations and Internationalisation of R&D". He said that the FDI resumed growth in 2004 led by developing countries which he described as moderate. FDI will continue to grow but there are risk factors involved. In attracting FDI Developing countries will take the lead and the services sector will dominate but for all this to happen there is a need for coherent government policy, he said. FDI in the Asia and Oceania region broke records in 2004 receiving US$ 148 billion in FDI US$ 46 billion more than in 2003 making it the top recipient among developing regions. Rapid economic growth, improved policy environment and increasing strategic commitments to Asian markets by Trans National Corporations (TNCs) contributed to this surge. China again was the largest recipient of FDI inflows not only among all countries in the region but also among developing countries worldwide. According to the report there is an uneven performance of FDI across regions ,countries and sectors. He said that the developed economies have recorded a continuous decline in FDI during the last three years while the developing economies have recorded a continuous increase in FDI during the last three years. In the world scenario the downturn in FDI has ended recording a 2% increase which is a moderate recovery. Developed countries attracted $ 64billion worth of Greenfield(new) investments while Mergers and acquisitions attracted $316 billion worth of FDI but this trend was reversed in the developing countries and South East Asia and CIS countries. Developing countries attracted $55 billion worth of FDI through mergers and acquisitions while $ 178 billion was new investment. According to the report the most attractive business locations are China, US,India, Brazil, Russian Federation,UK, Germany, Poland, and Singapore while the most attractive sectors are services sector, manufacturing sector and the primary sector. The major risks to global FDI flows are price volatility, slow growth in industrialised countries, political instability and civil war,global terrorism threat, exchange rate volatility and protectionism. He said that at present there is intense pressure on Trans National Corporations which has led to profits dropping from 26% to 9%. Among the other factors are the growing need to develop technological capabilities, adopting of technology to suit the host country, setting up R&D facilities outside developed countries, targeting global markets and using R&D as a source of innovation. The global R&D trends are global expenditure on R&D which amounted to $ 6.7 billion in 2002, highly concentrated by country and sectors,10 largest spenders accounting for more than 86% . The share of R&D in developed countries dropped from 97% to 91% while capabilities of R&D in the developing countries increased from 2-6%. Dr Samarappuli said that the report stresses the need for active coherent
government policies which should include an institutional framework to
foster innovation, coherent and targeted government policies focused on
Human resources, public research capability, IPR protection and competitive
policy. |
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