Geography Reference
In-Depth Information
2011). Indeed, rather than finance, this region is dominated by manu-
facturing. Java - particularly the Jabotabek region (i.e. Jakarta, Bogor,
Tangerang and Bekasi) in West Java, and Surabaya in the East part of the
island - has by far the highest concentration of manufacturing industries
of the country (Deichmann et al. 2005). Since the rapid industrialization
of the 1980s and 1990s, the bulk of foreign direct investment has been
located in the Greater Jakarta region. A wide array of regional develop-
ment policies - ranging from investment incentives for infrastructure
and human capital formation, to tax exemptions and transport networks
projects - have been put in place to tackle the huge disparities across the
country, and to address the serious concerns about remote regions such
as Eastern Indonesia (Hill 1991; Deichmann et al. 2005). Although these
peripheral regions in the Indonesian archipelago are endowed with rich
natural resources, their level of socio-economic development and attrac-
tiveness remains very poor due to several factors: low population density,
remoteness of some locations and communities, inadequate general infra-
structure, high transport costs, cultural and language barriers (Deichmann
et al. 2005). Empirical estimations (Deichmann et al. 2005) seem to suggest
that further public investment in infrastructure and transport networks
to increase the attractiveness of lagging regions to MNEs operating in
standard industrial activities is likely to prove ineffective, as the strong
urban and regional agglomerations, particularly of capabilities and skills
observed in the Java region, will continue to exert centripetal forces
towards the activities of both domestic and foreign firms.
In the case of Latin America, Brazil is by far the largest recipient of
inward FDI in the region, receiving approximately $19bn of annual
inward FDI, which represents over 40 per cent of FDI in South America
(UNCTAD 2007). However, although inward FDI in South America grew
by 18.5 per cent between 2004 and 2006, annual inward FDI inflows into
Brazil remained fairly static during this period (UNCTAD 2007). This
is in contrast with the trend registered by Brazil's FDI outflows which
increased dramatically to the largest in the region in 2006, amounting to the
record level of $28bn. For the first time, Brazil's FDI outflows surpassed
its FDI inflows: though this was mainly due to one mega-deal in which
a Brazilian mining company purchased a foreign company (UNCTAD
2007). Apart from this one case, however, over the medium term it is still
likely that FDI inflows into Brazil will continue to significantly outweigh
the FDI outflows, which previously were typically between $3bn and $9bn
per annum (UNCTAD 2007).
Both inward and outward FDI flows from Brazil tend to be concentrated
in extractive industries, resource-based manufacturing industries, and also
in the infrastructure and telecommunications sector (UNCTAD 2007).
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