Geography Reference
In-Depth Information
from its 2006‒2007 levels. Prior to the appearance of the US sub-prime
market problems, expectations were positive, with a 54 per cent increase
in the value of M&As in the first half of 2007 (UNCTAD 2007). However,
global business confidence appears to have fallen markedly within a very
short time, as strong uncertainties emerged regarding the levels of expo-
sure of different components of the international financial economy to the
US sub-prime mortgage market. In the previous recession following the
loss of business confidence in 2001, the decline in FDI was geographically
and sectorally uneven. Flows into manufacturing and services declined,
whereas those into primary sectors increased (UNCTAD 2003). Similarly,
the flows of FDI via M&As fell by more than greenfield FDI, and the
equity and loan components of FDI fell by more than reinvested earn-
ings. On the other hand, intra-regional FDI in South East Asia and North
East Asia actually remained very strong while global FDI was contracting
(UNCTAD 2003). A further impact of the global contraction in FDI was
that many countries actually increased the pace of their liberalization poli-
cies in order to compete for shrinking stocks of FDI (UNCTAD 2003).
The result of these observations is that there may well be short to medium
term falls in FDI in many parts of the global economy, reflecting the short
to medium concerns about economic growth in the aftermath of the global
financial crisis of 2008 and the subsequent Euro crisis, and such falls are
likely to be particularly noticeable in M&As and in high yield foreign
investments.
In the long term the institutional and organizational developments
outlined so far show no real signs of slowing down, and even though
global business confidence is currently suffering, the long-term trajec-
tory towards increasing international investment appears to be inevitable
(UNCTAD 2012; Ghemawat and Altman 2011, 2012). Yet, one of the out-
comes of these globalizing changes - as already highlighted above - is that,
while the number of bilateral investment treaties has accelerated rapidly,
as has the number of multinational firms in the global economy, the pat-
terns of international investment agreements suggests that the individual
regional trading blocs are actually becoming more important in develop-
ing the institutional frameworks for facilitating FDI (UNCTAD 2003).
This is clearly mirrored in the geographical configuration of one of the
critical organizational innovations of current globalization processes.
Global production networks (GPNs), as we have already seen in Chapter
4, depict the structural and relational nature of the current global organi-
zation of production, distribution and consumption of goods and services,
and capture specifically the nexus between 'global' and 'local' (Coe et al.
2008). Although GPNs obviously have an intrinsically dynamic nature,
and there is little or no comprehensive data on their evolution, they have
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