International Investment & MNCs

International Investment & MNCs

International Investment

Where are the investments going? And why?

Changes in 2009

Emerging Markets (formerly called Newly Industrialized Countries (NICs)

Capital flows to LDCs Source: The Economist 6/2/07
2002	2006
169 B	647 B
*$1.9 T in FPI during this time

Net FDI flows to Emerging Markets Source: The Economist 6/2/07
China	76 Billion
Russia	28 Billion
Turkey	19 Billion
Mexico	18.9 Billion
Brazil	18.8 Billion
Poland	12.6 Billion
Hungary	9 Billion
Chile	8.5 Billion
India	8 Billion
Romania	7 Billion
Record $325 B in 2006 to emerging markets in 2006, an increase of 7.3% from 2005

Multinational corporations

· A business that has subsidiaries outside of its own country-not just about trading abroad

· Has ownership of plants, resource extraction, processing operations, and/or services

· Package of capital, technology, managerial skills, marketing skills

· MNCs are measured in Gross Corporate Product (GCP)

MNCs use Foreign Direct Investment (FDI) to secure ownership of assets

· MNCs are measured in GCP-gross corporate product (total revenue a company makes in a year)

2009-Exxon-Mobil was top earner; Wal-Mart was 2nd
Exxon-Mobil succeeded Royal Dutch Shell that earned $458.3 B in GCP, Exxon Mobil was 2nd in 2008
Exxon-Mobil in 2009 GCP was $442,851 B; Wal-Mart's GCP was $405,607 B
Ranked with countries=world's 24th largest economy, ranking just below Norway

· MNCs overwhelmingly based in GN

-95% are owned by GN

43% are American or Japanese

-all but 5% held by EDCs

-few GS investors in or holders of MNCs

MNCs have become significant international actors-significant characteristics

1. Lots of money, power, and mobility to transmit power

2. Transnationality gives them unbounded mobility

3. Through wealth and technology can influence jobs and affect growth

4. They challenge tradition→are transmitters of culture and values

5. Development leads to→competition, but also leads to disparate distribution of wealth

MNC history:

-Post WWII-Cold War era--LDCs felt threatened by MNCs

-Post-Cold War era, need development, see MNCs as opportunity

LDCs-export processing zones (EPZs), aka Free Trade Zone (FTZ)
-maquilas in Latin America, for example
-over 3000 in over 120 developing countries
China-special economic zones (SEZs)
-started with 4 zones, now has more than 10 zones
-model for others--particularly India
Incentives

-In post CW era, MNCs have helped to internationalize the process of production