Geography Reference
In-Depth Information
8.4
MODES OF FDI IN THE BRIICS COUNTRIES
Observation of the increasing levels of FDI in developing and transi-
tion economies demonstrates that the dominant mode of FDI entry
in these countries is quite different to that in developed economies. In
particular, if we consider mergers and acquisitions (M&As), developed
economies are by far the largest destinations for FDI. As we have noted
in Chapter 2, this corresponds to MNEs investing in advanced locations
with a blending of different aims, of which the most dominant are likely
to be related to the search for specific- and strategic-assets. However,
the picture which emerges is very different if we consider the so-called
'greenfield' projects. Greenfield FDI projects are the foreign affiliate
investments whereby a brand new establishment is constructed on a new
site. The number of such greenfield FDI increased globally by 13 per cent
to some 11,800 projects in 2005. Manufacturing accounted for 54 per cent
of these projects, with the service sector accounting for 42 per cent and
primary industries for 4 per cent (UNCTAD 2007). In terms of broad
regions, South, East and South East Asia accounted for 3515, or around
30 per cent of all greenfield projects. China alone accounted for 1378
greenfield FDI projects, or 11.6 per cent of the global total, while India
received 981, representing 8.3 per cent of the overall total. For the other
BRIICS countries the numbers of greenfield FDI projects are very much
lower: 386 for Russia, 145 for Brazil, 93 for Indonesia and 74 for South
Africa (UNCTAD 2007). In order to give a sense of the relative scale of
these numbers, as we see in Figure 8.1, in the same year the number of
greenfield inward FDI projects in the US was 723, in the UK 669, and in
France 582 (UNCTAD 2007). Asian economies, and in particular China
and India, are by far the most important locations for greenfield FDI
projects.
China has now by far the largest number of domestically located MNE
foreign establishments, with 42,753 foreign affiliates in 2004 employing
some 24 million employees (UNCTAD 2007). These affiliate establish-
ments are heavily concentrated in manufacturing industries. The 24
million employed in China in foreign affiliates represents one-third of
the global total workforce currently employed in foreign affiliates: this
number has increased fivefold from less than 5 million in 1991 (UNCTAD
2007).
If we consider sectors other than manufacturing, the importance of
greenfield FDI is seen to be rather different for some other developing
economies. Brazil, for example, hosts the ninth largest number of finan-
cial foreign affiliates in the world, as well as hosting by far the largest
number of such affiliates amongst developing and transition economies,
