Wednesday, April 11, 2007
The CIBA Business Forum 2007
At the end of March this year I attended the China-India-Brazil-Africa business forum on enhancing trade and investment flows. This conference was aimed at bringing together delegates from these countries, whether they own their own businesses, work for big corporates, government officials etc. The main focus was enhancing South-South economic activities between the above mentioned countries.
Foreign Direct Investment (FDI) is the main source of capital and technology flow from developed to developing (South) nations. But in recent years the global economy has witnessed an increasing number of FDI transactions between developing nations. Developing nations acquire well known global companies, and there are a growing number of transnational corporations (TNC’s) from developing countries.
China’s outward FDI (OFDI) has been remarkable, and it is mostly invested in oil, natural gas and minerals. Also, investments in services are growing. Most of China’s outward investments go to developing nations.
India is a significant OFDI source, especially in the IT, manufacturing, pharmaceutical and natural resources sector.
Brazil is one of the leading outward investor from developing countries, and they have been actively investing abroad, primarily in energy and mining.
South Africa is the largest OFDI source in Africa. In 2004, the amount reached an all-time high of USD 29 billion. This is a 67% share of the region’s OFDI stock.
It is remarkable to see how South-South relations are strengthening. It is causing a great shift in the global economy, where some of these developing nations are gaining political and economic influence. There are, however, some perceived problems with South -South investment. There is still the problem of poor logistics, burdensome customs procedures for trade in certain goods, and the distance amongst these countries, but once these logistics and barriers are overcome, and more aggressive free trade agreements are developed, can South-South trade continue to grow even faster.
The emerging markets like these are moving and growing faster than the G10. E.g. emerging market Asia is the key in manufacturing, and a country like Mexico is expanding even more into North America. And seeing that FDI is the largest source of foreign financing, it is very healthy for the developing nations where a transfer of technology and managerial skills is at the forefront of gaining economic growth. This can even be the start of a shift in regional economic dominance by the North.
The importance of South-South cooperation should be highlighted and reminded to all of those involved in the process. It spurs environmental, social, employment, technology and investment benefits, and it increase availability of low-cost high-quality goods. But most of all, it can finally start narrowing the gap between the rich and the poor.