The recent waves of globalisation have substantially transformed the modes of production and trade in both developed and developing countries. This is reflected in the changes in the extent of information and technology in the workplace, firm’s production and organisational strategies, trade and FDI liberalisation policies, and new rules of international trade and investment. Given these developments, the sectoral trends (primary, manufacturing and services) in FDI have changed rapidly over the past two decades.
The most striking feature of FDI over the past 15 years is the sharp decline in the share of the primary goods sector. Indeed, the share of the primary goods sector has more than halved between 1988 and 1997 in developing countries (Table II.4). Another striking trend is the growing share of the services sector5. This was especially prominent during the M&A boom between 1987 and 2000. Indeed, the share of the services sector M&A in the year 2000 was more than twice the sum of the primary and manufacturing sectors (World Bank, 2003). Table II.4 shows that the drop in the share of the primary goods sector is almost equal to the increase in the services sector. In terms of the level of FDI, however, the manufacturing sector remains the most important sector in developing countries.
The increasing role of the services sector is notably the case in China, which receives the highest level of FDI in developing countries6. Between 1984 and 1993, the service sector has grown from 32.2 to an astonishing 47.3 per cent share of total FDI.
This was at the expense of a diminishing primary goods sector which went down from 40.9 to 3.1 per cent during the same period. Following the general trends in developing countries, the share of the manufacturing sector in FDI for China remains dominant at 51.2 per cent in 1993.
Regional disparities in the sectoral composition are evident in Table II.4. The African region appears to go against the overall developing country trends with the share of primary goods remaining high and constant and the share of services diminishing.
This is due to the fact that a large number of MNEs operating in Africa are still attracted by the abundance of natural resources rather than the market or host-country investment climate. The Latin American and the Caribbean regions show a large drop in the share of the manufacturing sector with a corresponding increase in the share of the services sector. The Asian region exhibits a large and stable share of the manufacturing sector.
Technologically advanced FDI has become more and more dominant in recent years. This should be reflected by resource-based manufacturing being replaced by high-technology manufacturing firms. There is also evidence that a number of manufacturing firms have created services-related enterprises due to the necessity of outsourcing part of the enterprise operation (UNCTAD, 1999). While Table II.4 is consistent with this observation, the trends in the technology content of production are not so evident. In order to clarify the distinction in different levels of technology that are imbedded in goods produced by the MNEs, Figure II.2 presents the annual growth rate of world exports by technological intensity. Given that a substantial fraction of manufacturing goods generated by MNEs in developing countries is exported, Figure II.2 should provide an approximation of the trends in the technological level of the goods produced through FDI. Figure II.2 clearly indicates that the higher the technological content of the exported goods, the higher the growth rate. Products with the lowest extent of technology such as primary goods and resource-based manufacturing exhibit the lowest growth rate in world exports.
To learn more about this author, visit OECD Development Centre's Website.
Like this article? Share it with your friends
 |
Related Businesses - Evan Elite Authors |
|
The Evan Elite Authors program is currently in beta phase. For details please contact us.
|
|
|
OECD Development Centre
(Visit OECD's Website)
Created in 1962 by the Organisation for
Economic Co-operation and Development
(OECD) in Paris, the Development Centre is
an interface between OECD Member countries
and the emerging and developing
economies.
The Development Centre occupies a unique
place within the OECD and in the
international community. It is a forum
where countries come to share their
experience of economic and social
development policies. The Centre
contributes expert analysis to the
development policy debate. The objective
is to help decision makers find policy
solutions to stimulate growth and improve
living conditions in developing and
emerging economies.
|
|
|
OECD Development Centre's
Complete
List Of
African-Accounts
Articles
|
|
If you enjoyed this article, get OECD Development Centre's Complete List of African-Accounts Articles For FREE!
|
|
|
|
![[Get Copyright Permissions]](http://license.icopyright.net/images/icopy-w.gif){kind=small}
