New SouthCentre Paper: Foreign Direct Investment, Investment Agreements and Economic Development: Myths and Realities

Announcing a New Research Paper from the South Centre   Foreign Direct Investment, Investment Agreements and Economic Development: Myths and Realities   South Centre Research Paper No. 63 October 2015 45 pages English ISSN 1819-6926 The South Centre recently published Research Paper No. 63: Foreign Direct Investment, Investment Agreements and Economic Development: Myths and Realities, authored by Yılmaz Akyüz. Foreign direct investment (FDI) is one of the most ambiguous and the least understood concepts in international economics.  Common debate on FDI is confounded by several myths regarding its nature and impact on capital accumulation, technological progress, industrialization and growth.  It is often portrayed as a long term, stable, cross-border flow of capital that adds to productive capacity, helps meet balance-of-payments shortfalls, transfers technology and management skills, and links domestic firms with wider global markets. However, none of these are intrinsic qualities of FDI.  First, FDI is more about transfer and exercise of control than movement of capital.   It does not always involve flows of financial capital (movements of funds through foreign exchange markets) or real capital (imports of machinery and equipment for the installation of productive capacity).  Second, only the so-called greenfield investment makes a direct contribution to productive capacity and involves cross-border movement of capital goods, but it is not easy to identify from reported statistics what proportion of FDI consists of such investment as opposed to transfer of ownership of existing assets.  Third, what is commonly reported as FDI contains speculative and volatile components.  Fourth, the longer-term impact of FDI on the balance of payments is often negative even in countries highly successful in attracting export-oriented FDI.  Finally, positive technological spillovers from FDI are not automatic but call for targeted policies of the kind that most investment agreements prohibit. To access the research paper directly, go to this webpage: http://www.southcentre.int/research-paper-63-october-2015/. To access the South Centre website, where you can also find other research papers, publications and news items, go to this webpage: http://www.southcentre.int .     South Centre Chemin du Champ d'Anier 17 PO Box 228 1211 Geneva 19 Switzerland Telephone: (41 22) 791 8050 Fax: (41 22) 798 8531 Email: south@southcentre.int Copyright © 2015 South Centre, All rights reserved.