Foreign Direct Investment flows have risen dramatically: from some US$40 billion at the beginning of the 1980s, to US$610 billion at the end of 2004; Foreign Direct Investment outflows from developing countries today are already higher than world Foreign Direct Investment flows were 25 years ago. And there is no reason why FDI flows should not increase further, and substantially so. Worldwide, they account for 10 percent of gross domestic capital formation, but in some countries (UK, Singapore) they are quite high. The supply of Foreign Direct Investment is not fixed – it is a function of three basic factors: 1. Progress in technology – which makes it increasingly easy for firms to operate international production networks. In this regard, computer-communication and transportation technologies have been particularly important in recent times. 2. The continued liberalization of Foreign Direct Investment regimes and the strengthening of standards of protection of foreign investors through international investment agreements – which create the space into which firms can expand with security. This liberalization trend is pervasive: between 1991 and the end of 2003, nearly 1,900 changes of Foreign Direct Investment frameworks took place in some 150 countries, 95 percent of which went in the direction of creating a more welcoming investment climate. These changes at the national level are complemented by international investment agreements. 3. Competition among firms – which drives them to take advantage of the opportunities offered by technology and liberalization in order to increase their international competitiveness by establishing a portfolio of locational assets, i.e. to undertake Foreign Direct Investment. Source used: What’s Next? Strategic Views on Foreign Direct Investment">More and more firms have become transnational. For developed countries for which time-series data are available, the number of transnational corporations (TNCs) rose from 7,000 in 1968/69 to close to 40,000 in 2003; the total number of TNCs worldwide is today easily above 60,000. And firms that are already established abroad transnationalize further. Not surprisingly, therefore, world Foreign Direct Investment flows have risen dramatically: from some US$40 billion at the beginning of the 1980s, to US$610 billion at the end of 2004; Foreign Direct Investment outflows from developing countries today are already higher than world Foreign Direct Investment flows were 25 years ago. And there is no reason why FDI flows should not increase further, and substantially so. Worldwide, they account for 10 percent of gross domestic capital formation, but in some countries (UK, Singapore) they are quite high. The supply of Foreign Direct Investment is not fixed – it is a function of three basic factors: 1. Progress in technology – which makes it increasingly easy for firms to operate international production networks. In this regard, computer-communication and transportation technologies have been particularly important in recent times. 2. The continued liberalization of Foreign Direct Investment regimes and the strengthening of standards of protection of foreign investors through international investment agreements – which create the space into which firms can expand with security. This liberalization trend is pervasive: between 1991 and the end of 2003, nearly 1,900 changes of Foreign Direct Investment frameworks took place in some 150 countries, 95 percent of which went in the direction of creating a more welcoming investment climate. These changes at the national level are complemented by international investment agreements. 3. Competition among firms – which drives them to take advantage of the opportunities offered by technology and liberalization in order to increase their international competitiveness by establishing a portfolio of locational assets, i.e. to undertake Foreign Direct Investment. Source used: What’s Next? Strategic Views on Foreign Direct Investment
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