Thailand Crisis 2010 Analysis
Global trends in FDI
Global trends in FDI
Al Nasir Hafeez
According to the latest figures from the World Bank, IMF, ADB and other international agencies, there has been a phenomenal increase in global FDI inflows the world since the beginning of the new millennium. It was at its peak in 2000, fell nearly 40 percent in 2001 and fell again in 2002-03. According to the figures, has been the decline in the longer and larger. However, 2004 marked the beginning a rapid recovery and is now in its third year. Meanwhile, global FDI flows increased by over 20 percent per year. In fact, now it is estimated that global FDI is operating in a favorable time, which may be extended at the end of the decade. With a single-digit growth from 2007, global FDI flows in 2010 reflect the 2000 peak of $ 1.4 trillion in nominal terms.
Foreign direct investment and emerging markets
The post-2003 rebound was taken by emerging markets. FDI inflows in these regions increased by 57 percent in 2004 to 26 percent in 2005 to a record of nearly $ 400 billion or more than 40 percent of the global total.
According to The Global Competitiveness Report (2006-07), Pakistan has been relatively good in market efficiency (ranked 54 th) with the "sophistication of business" and "innovation" (Qualified 60th and 66, respectively, which is a good signal to foreign investors.
According to Standard and Poor's (S & P) the upward trend of FDI in emerging economies (EME) is expected to continue in 2005. FDI flows to emerging markets grew at a rate rapidly in 2004, reaching 286 billion U.S. dollars, representing an increase of 42 percent since 2003. Consequently, global FDI flows rose for the first time in three years, reaching 648 billion dollars. It was 2.5 percent more than in 2003.
forecasts for the future
The FDI flows to emerging markets remain strong in 2006-10, averaging more than $ 400 billion per year, but growth rates will be modest as queues privatization and the global economy slows. FDI inflows can dry out in the country in the process of full privatization. In areas where the Kingdom of Thailand the Federative Republic of Brazil and the Republic of Poland, FDI in retail sector was an important source of productivity growth, resulting in price lower and higher consumption.
In 2006, FDI inflows to emerging markets is expected to increase only 3 percent in U.S. dollars while inflows into developed countries should increase by about 36 percent. In part due to the recovery of flows to emerging markets has been completed, while the developed countries has only just begun.
The United States, the world's largest economy, must remain a powerful magnet for foreign capital, which attracts nearly a quarter of FDI inflows worldwide in 2006-10.
The UK is considered the primary beneficiary FDI in 2005 to 164,000,000,000 dollars. The top ten recipient countries especially in developed countries should take into account more than two thirds of the current Global FDI.
These countries are: UK, USA, China, France, Luxembourg, Netherlands, Hong Kong, Canada, Singapore and Germany.
The phenomenon of mergers and acquisitions
It is expected that most of the increase in global FDI flows since 2007 will take place in countries developed and mergers and acquisitions (M & A) will be the driving force in it.
The value of mergers and acquisitions and a jump to U.S. $ 435 million in the first half of 2006, an increase of 48 percent over the same period in 2005, and was heavily concentrated in the developed world. Currents FDI increased resources to services such as banking (Barclays / Absa side) and telecommunications (Vodafone / Vodacom deal.)
Role of protectionism or nationalism economic
It was predicted that due to increasing incidents of protectionism or economic nationalism, could be a decrease in FDI flows and the pace of mergers and acquisitions (M & A) in the coming days.
The rise of protectionism against China by the EU and United States could undermine the true spirit of M & A. The European Commission and the United States Congress have already taken legal measures to protect their economies attack against Chinese goods and foreign possessions.
The law and order situation deteriorating, the slowdown of the privatization process, less process of reforms and rising corruption, the expansion of economic parities and, finally, higher political risk are supposed to be a major reasons for the gradual slowdown in FDI inflows in emerging markets.
FDI and foreign portfolio investment in Pakistan
According to official claims, the country hopes to achieve $ 7 billion investment FDI in the current year. The government plans road shows in Middle East and Europe inform investors of investment opportunities in the country many manufacturing and infrastructure projects.
In this sense, Privatization Commission has already published its list of priorities for 2007 expected sales. The inflow of foreign direct investment (FDI) also increased significantly during the first two months of the year. During July and August from 2006 to 2007, FDI reached $ 375,400,000 against $ 230,800,000 during the corresponding period last year, an increase of 63 percent.
Pakistan received record foreign direct investment of approximately $ 3521000000 period 2005-06, including privatization proceeds. Experts estimate that the portfolio above would improve the country's image abroad and most FDI is the proof that the country's potential for foreign investment.
Benchmarking
Of FDI inflows Pakistan in 2004-05 and 2005-06, the communication sector has the largest share with 517 million, or 34 percent. It was followed by financial institutions – 17.7 percent, oil, gas and petrochemical industry – 14.3 percent, power – 4.8 percent, trade – 3.4 percent, chemical products – 3.3 percent and other – 22.5 percent.
Recently, the government has also established an Investor Relations Office of Ministry of Finance to keep investors foreigners in Pakistan's economy. According to its statistics, Pakistan has shown an increase of 37.7 percent in terms of total investment in both first months of the year with the same period last year.
Certificates of deposit
Plans are underway to collect at least billion dollars abroad through depositary receipts (GDR) offers of financial sector alone. MCB, National Bank of Pakistan, United Bank Limited, Habib Bank and Kot Addu Power Project are in line to launch its initial public offering and the GDR in the coming days.
However, due to several delays, the price of the shares of OGDC Rs165 to RS125 fell in June despite the new findings by the Corporation.
MCB GDR float of $ 100 to $ 150 million Merrill Lynch is already underway and plans for touring in the Far East, Middle East, Europe and North America from next month.
Private foreign investment in Pakistan's stock market has suddenly jumped in September 2006. Almost all investments were in the States States and the United Kingdom.
According to the latest figures from the PAS (2006), an investment at the rate of 42.096 million dollars stolen from capital markets Pakistan. Was much higher than portfolio investment in July and August a total of $ 31.9 million. While the usually active population in Singapore, the United Arab U.S., Saudi Arabia and some European countries remained on the sidelines, U.S. has invested 26,730 million and the UK $ 16.371m in September. Most investments were in oil, while telecommunications and cement has also attracted some of the investments.
Analysts estimate that if this rate of investment portfolio continues throughout the year, could cross investments last year.
Concluding remarks
FDI is the engine of growth Today's economic. Countries need more FDI and FPI, to generate employment opportunities, and desired economic objectives. For Pakistan, it is a matter subsistence, because FDI is crucial to zoom account and trade deficits.
In fact, the deficit Pakistan's current account has ballooned to $ 5.5 billion in FDI was 06 and worth $ 3.5 billion including $ 1.5 billion in privatization revenues and $ 2 billion of foreign investments green field seen through the veil of the crisis. It is therefore imperative that efforts to attract me more and more FDI and portfolio investment.
About the Author
Thaksin Shinawatra phone interview – “how can Thailand have reconciliation?” (Australian media)