38790 5002 Southern Multinationals REBOTCO A Growing Phenomenon CO-AUTHORS1 JOSEPH BATTAT · DILEK AYKUT South-SouthFDInowaccounts Table1: SelectedlargeM&AdealsbySouthernMultinationals,2004-2005 foronethirdofallFDIgoing Year AcquiringCompany AcquiredCompany Sectorofthe Value todevelopingcountries,andis (Country) (Country) AcquiredCompany ($billion) SOUTH-NORTHDEALS growing.Thisisgoodnews 2005 Cemex(Mexico) RMC(UK) CementIndustry $4.1 AIDNI,IABMUM,5002 becausethisFDItypically 2004 AmBev(Brazil) JohnLabatt(Canada) MaltBeverages $7.8 reachesverypoorandremote 2004 GoldFields(SouthAfrica) NorimentLtd(UK) MetalServices $1.3 developingcountries. 2004 TataMotorsLtd(India) DaewooVehicle(SouthKorea) MotorVehicles $0.1 SOUTH-SOUTHDEALS ThisisbecauseSouthernmultinationalcorporations 2005 AmericaMovil(Mexico) TIMPeru(Peru) Telecom $0.5 (MNC)aremorefamiliarwithchallenginginvest- mentclimatesandarealsobetterequippedto 2004 TelefonosdeMexico(Mexico) ColumbiaTelecomunicaciones Telecom $0.4 deliverproductstailoredtolowincomeconsumers. 2004 AnglogoldLtd (SouthAfrica) AshantiGoldfileds(Ghana) GoldOres $1.5 REBMEVON South-SouthFDIflowsareprimarilyregional,and 2004 Sinergy(Brazil) Avianca(Columbia) AirTransportation $0.4 concentratedintheinfrastructureandextractive sectors,withanincreasingsectordiversification. 2004 YTLPower(Malaysia) JawaPower(Indonesia) ElectricServices $0.2 SouthernMNCs'areattractedtonewprofitablemar- SELECTEDANNOUNCEDOILANDGASDEALSBYSOUTHERNMULTINATIONALS(DEALSNOTNECESSARILYACTUALIZED) 01 kets,resourcesandstrategicassets. Themotivation islessaboutseekinglowfactorcosts,whichmeans Year PurchasingCompany SellerCompany Locationofthe Value &9 thatdevelopingcountriesshouldbelessworried (Country) (Country) AcquiredAsset ($billion) SinopecGroup(China)50%and $70-100 YMONOCE abouttheseFDIoutflows. Whilegovernmentsin 2005 NationalIranianOilCompany YadavaranOilFields(Iran) manydevelopingcountriesareencouragingoutward ONGC(India)20% (over30years) FDI,SouthernMNCscontinuetofaceregulatoryand 2005 AndesPetroleum(China) EnCana(Canada) Ecuador $1.42 operationalchallengesintheirhomeeconomy. Many 2005 CNPC(China) PetroKazakh(Canada) MainlyinKazakhstan $4.18 SouthernMNCsnewontheinternationalmarketare DLRO havinggrowingpains,similartothoseofNorthern 2004 Gazprom(Russia) Lietuvos(Lithuania) Lithuania $0.05 MNCsafewdecadesago,andaremovingupthe Source: UNCTAD(2005),Goldstein(2005)andWorldBankstaff WEHT ladderofcorporatesocialresponsibility. Tobenefit fromSouth-SouthFDI,developingcountries,whether thatstartedovertwodecadesago. Aconfluence SubstantialemergingmarketFDIflows hostorhometoFDI,needtopursueinvestment offactors­increasingwealth,looseningcapital onaregionalbasis NIECROF climatereforms.. controls,tradeliberalization,andregionalintegration ­haveledtomanydevelopingcountriesbecominga Intheirsearchfornewopportunities,Southernmulti- GrowingSouth-SouthFDIFlows significantsourceofFDI,particularlytootherdevel- nationalstendtoinvestclosetotheirhomecountry opingcountries.Infact,accordingtoroughestimates, andwheretheyhaveacquiredacertainfamiliarity GNISIR RecenthighlypublicizedacquisitionssuchasLenovo's South-SouthFDIflowsincreasedfrom$15billionin throughtrade,orethnicandculturalties.Asaresult, purchaseofIBM'sPCbusinessandCemex'sacquisi- 1995to$46billionin2003,accountingforabout35 thereisasignificantregionalaspecttomostSouth- tionofUK'sRMChighlightedthephenomenonof percentoftotalFDIflowsindevelopingcountries. SouthFDIflows(Table2,followingpage). Following A theemergenceofSouthernmultinationals,atrend Atthesametime,highincomeOrganisationfor tradeliberalizationinLatinAmerica,multinationals :SLANOITANITLUM EconomicCo-operationandDevelopment(OECD) fromChile,Brazil,andArgentinaexpandedtheir membercountriesreceived$16billionofFDIfromde- operationsmainlyinotherdevelopingcountriesin DilekAykut(daykut@worldbank.org)isanEcono- velopingcountries(South-NorthFDI)in2001,upfrom theregion. Russianinvestmentsabroadhaveprimar- mistandFDIspecialistforDevelopmentProspects $1billionin1995. South-NorthFDIflowsamounted ilybeeninthecountriesoftheformerSovietUnion. Group,whichpublishesGlobalDevelopmentFinance, to$7billionin2003.Althoughdataisnotavailable Turkeyhasalsobeenactivelyinvestingregionally, aWorldBankflagshippublication. for2004and2005,recentlyfinalizedandannounced particularlyinWestandCentralAsia,andRussia.Fur- M&AdealssuggestthatSouthernmultinationals ther,SouthAfricaninvestmentsinotherdeveloping JosephBattat(jbattat@ifc.org)isaLeadEconomist andRegionalProgramCoordinatorforChinaand continuetoexpandglobally(Table1,above). countriesarealmostcompletelyintheSouthernpart NREHTUOS MongoliaattheForeignInvestmentAdvisoryService (FIAS),ajointfacilityoftheWorldBankandInterna- 1 Thisnotewaspreparedfortheconference"SouthernMultinationals:ARisingForceintheWorldEconomy,"9&10 tionalFinanceCorporation. FIAShelpsgovernments November,2005,Mumbai,India. ItisaproductofthestaffoftheWorldBank.Thefindings,interpretations,and improvetheinvestmentclimateintheircountry. conclusionsexpressedhereindonotnecessarilyreflecttheviewsoftheBoardofExecutiveDirectorsoftheWorldBank orthegovernmentstheyrepresent. Table2: Regionalflowsby structureinvestments.Between1998and2003,Southern Figure1: Totalforeigninvestment SouthernMultinationals MNCscontributedalmost$30billionininfrastructure ininfrastructuresectorindeveloping projectsindevelopingcountries.Theirparticipationwas (%oftotaloutflows/country) particularlysignificantintelecomandininfrastructure countries,1998-2003 projects(Figure1,right)inAfrica. Since2003,South- FromNorth FromSouth COUNTRY %REGIONAL ernexpansioninthetelecomsectorhascontinuedas (SOUTH-SOUTH) Mexico'sAmericaMovil,Egypt'sOrascomTelecomand %ofTotalForeignInvestment Brazil 10.4 variousRussiantelecomfirmsacquiredassetsinother 100% developingcountries(Table1,previouspage). 90% China 20.7 80% 70% India 25.4 Theextractivesectorhasalsoattractedalargeamountof 60% FDIfromSouthernMNCsbecauseofthreefactors.First, 50% Hungary 75.1 nationaloilcompaniesfromtheSouthareleadingplayers 40% Thailand 58.8 inthemarketbecauseoftheirexclusiveaccesstooil 30% 20% Turkey 32.0 reserves;almost70percentofoilproductiontakesplace 10% indevelopingcountries.Asthesestate-ownedenterprises 0% Russia 37.0 haveexpandedtheiroperationsgloballybothinupstream LAC EAP SSA MENA ECA SA Source: WorldBank(2005) Source: Goldstein(2006)marketstodiversifytheirportfolioanddownstream marketstoreachconsumersdirectly,otherdeveloping ofAfrica,andcompaniesfromIndiaandChinahavebeen countrieshavebeentheirmaindestinationsparticularly whitegoodsproducer,hastwomanufacturingplantsin particularlyactiveinAsiancountries. forupstreaminvestments.Thus,South-SouthFDIflows IndiaandoneinThailand,andannouncedplansforan havebeenprominentintheoilandgassectors(Table3, R&DcenterinIndia.AfewSouth-Northinvestmentsout- Thereisalsosomeindicationthatstrongeconomicand below). Second,mostofthepopulationandeconomic sidetheextractiveandinfrastructuresectorshavebeen culturaltiesplayarolewhenthesecompaniesinvestin growthistakingplaceinthedevelopingworld.Tosecure comparativelylarge;AmbevinCanada,CEMEXinthe developedcountries.Forexample,almostallFDIoutflows accesstoadditionalresourcesandensuretheirlong-term UK,LenovointheUS,andTCLinFrancehavepositioned fromLatinAmericatohigh-incomeOECDcountrieswent supply,countriestrytoacquireassetsinothercountries. thoseSouthernMNCstoplayinthebigleague. totheUSandSpain.Majorinvestmentdestinationsfor State-ownedoilcompaniesinChinaandIndiahavebeen EastAsianinvestorsareKoreaandAustralia.Further,the particularlyforcefulinrecentacquisitionsofoil-and SouthernMNCoutwardFDIdriversare UKreceives40percentofAfrican­mainlySouthAfrican gas-relatedassets.Thetwocountrieshavestartedtoco- similartothoseofNortherncounterparts ­investmentstohigh-incomeOECDcountries. operate,ratherthancompete,forsomeofthoseassets. TheyarealreadyshareholdersinSudan'sNileproject,and ThreefactorshavedrivenoutwardFDIfromemerging Taxhavencountriesareaspopulardestinationsformany willbepartnersagainiftheexplorationanddevelop- marketcountries(EMCs):accesstoresources,accessto SouthernMNCsasforNorthernMNCs.CaymanIslands, mentprojectinIran'sYadavaranoilfieldisactualized. markets,andaccesstostrategicassets. Efficiency-seeking BermudaandCyprusaremaindestinationsforBrazilian, Finally,somesouthernoilandgasmultinationalssuchas hasnotbeenamajordriver. IndianandRussianFDI.HongKongplaysanimportantrole PetrobrasandPetronasleveragetheiradvancedtechnical forChinesecompanies,asabasefromwhichtoexpand capacity,suchasdeep-waterexploration,inordertogain Accesstoresources overseas. globalpresenceinthesector. Experiencingsustainedhigheconomicgrowthinrecent However,thereareindicationsthatSouthernMNCsare Thelargeinvestmentsintheextractiveandinfrastructure years,afewEMCsareunderpressuretosecurerawma- increasinglyventuringbeyondtheirimmediateregion. sectorsmasksmallerscaleSouth-SouthFDIflowsinother terials,includingoilandgas. Theyoftenseektodiversify LatinAmericanandAsianinvestmentsarefindingtheir sectors.ManySouthernMNCsinvarioussectorssuchas theirsourcesfromawiderangeofcountries,including wayintoAfrica,AsianinvestmentsareenteringLatin banking,brewery,pharmaceuticals,retailing,textile,and thosewherethereisnostrongpresenceofOECD-based America,andLatinAmericaninvestmentsareenter- tourismhaveinvestmentsinotherdevelopingcountries. MNCs. ChinaandIndiaaretwocasesinpoint,with ingAsia.Morerecently,ChineseandIndianfirmshave Forexample,UralAZ,aRussianautomobilemanufacturer, growinginvestmentinenergyandmininginSub-Sahara acquiredhighvalueassetsintheUSandEUcountries. hasplantsinChina,Egypt,andIndia,andannouncedplans Africa,CentralAsia,andLatinAmerica. Ofthedealsin toopenassemblyunitsinEthiopiaandBrazil.Angola's theextractivesectorthatChina'sstate-ownedenterprises Concentrationintheinfrastructure largestnon-oilFDIcomesfromOdebrecht,aBrazilian aremakingworldwide,abouthalfofChina'soutwardFDI andextractivesectors engineeringandconstructioncompany.Haier,aChinese wenttonaturalresourcesprojectsinLatinAmericain South-SouthFDIflowsarehighlyconcentratedinthe Table3: SelectedState-OwnedSouthernMultinationalsinoilandgassector infrastructureandextractivesectors,mostlyintheform oflargeM&Aandprivatizationdeals.Inthelate1990s, CORPORATION(HOMECOUNTRY) COUNTRIESINWHICHCOMPANYOPERATES globalinfrastructurecompaniesbegantowithdrawfrom CNPC(China) Sudan,Venezuela,Kazakhstan,Myanmar,Ecuador,Mauritania,Canada theSouthbecauseoflessthanexpectedreturnsandthe globaldownturninthesector.Theresultingvoidwasin IndianOilCorp. Libya,Iran partbeingfilledbythoseemergingSoutherncompa- Lukoil (Russia) Iraq,Romania,Ukraine,Bulgaria,Canada,Uzbekistan nies,particularlyinthetelecomsectorthathadgained experiencethroughtheirpartnershipswithglobalplayers PDVSA(Venezuela) Brazil,Argentina,Chile,Paraguay,USA(CITGO),Germany,Belgium overtheyears. Theywantedtoleveragetheirexperience Petrobras (Brazil) Mexico,Nigeria,Tanzania,Libya dealingwiththepoliticaleconomyaspectsofinfra- Source: Aykut(2006) 2004. Similarly,India'sOilandNaturalGasCorporation Asmallbutincreasingnumberofinvestments,mainly Developingcountrieslacktheinstitutionalinfrastructure closeddealsintheRussianFederationandinAngola.The fromAsia,arebeingmadeinR&Dtotaptechnologyin forthesupportservicesfoundindevelopedcountries. searchfornewsourcesofrawmaterialshasalsotaken awiderangeofsectorsindevelopedcountries. Almost Accesstoknowledgeableconsultingfirms,businessas- SouthernMNCstodevelopedcountriessuchasAustralia allIndianITfirmshavesuchaninvestmentindeveloped sociations,banks,andothersourcesofinformationabout andCanada. countriesincludingtheUS. Chinahas37R&Doperations overseasmarketsandpracticesismoredifficulttoobtain. abroadinavarietyofsectorsincludingengineeringand Unlikeindevelopedeconomies,outwardinvestment Accesstomarkets IT. Twentysixofthoseoperationsareindeveloped promotionservicesarenon-existentorintheirinfancyin economies. SouthKoreahasover60R&Dfirmsoverseas. mostEMCs. Thesehandicapshaveaffectedthedevelop- Accesstomarketsisthesecondmostimportantdriverof MexicanfirmshaveinvestedinbiotechnologyintheUS. mentandoperationsofoverseasprojects,particularlyfor outwardFDIfromEMCs.SouthernMNCs,similartothose ItisinterestingtonotethatafairproportionofR&D EMCsrelativelynewtooutwardFDI. fromtheNorth,searchforhigherreturnsandlowerrisks investmentfromSouthernMNCsindevelopingcountries throughportfoliodiversification.Usingtheexperience hasgonetootherdevelopingcountries. Inadditionto Operationalchallengesofinvestingabroad acquiredintheirhomemarket,andtakingadvantageof anincreasingnumberofR&Dprojectsfromhigh-income globalizationandtradeliberalization,particularlyregional OECD-basedMNCs,ChinaandIndiaareamongthe Ifthereisageneralizationtothecomparativeadvantages integration,alargenumberoffirmsinEMCsareventuring largestrecipientsofSouthernR&DFDI,withinvestment ofSouthernMNCsvis-à-vistheirNortherncounterparts, intoforeignmarkets,oftenclosetohome,butincreas- fromoneanotherandfromSouthKorea,Malaysia,and itwouldbealowercoststructure;anability,developed inglybeyond. Theyexploitanumberofassetsthatthey Thailand. intheirdomesticmarket,tocopewithuncertaintiesin havedevelopedathome:productsandproductionpro- thebusinessenvironmentofhostcountries;andoffering cessesappropriatetoEMCmarkets;theabilitytomanage SouthernMNCsexpectaninvestment-friendly productsandservicesoftenmoresuitabletohostcoun- regulatoryprocesses,particularlyininfrastructure;ability investmentclimateinhostcountries tries'markets. However,mostSouthernMNCsdoface tonetworkinneighboringcountries;knowledgeof seriousoperationalchallenges. culturesandmarkets;andlowcoststructures. WhetherNorthernorSouthern,MNCslookforaninvest- ment-friendlybusinessenvironment. ,Agoodinvestment Businessoperationsissuesvarysubstantially,mainly Forexample,MNCsintheITandtelecommunication climateentailsnotonlyacertainlevelofmacro-eco- accordingtothelevelof experienceofaSouthernMNC sectorsfromIndia,SouthAfrica,Mexico,Malaysia,and nomicstability,butalsomicro-economicpoliciesand asaforeigninvestor,andtosomeextenttothebusiness Chinahaveexpandedtheirmarketabroad. Bothsectors practicesthatofferaregulatoryenvironmentwithare- environmentintheirhomecountry. ManyMNCsinBrazil, aregrowingglobally,andinbothcasesSouthernfirms ducedlevelofbureaucraticburdenandcosts,andahigh India,SouthAfricaandTurkeyhavealreadyadvanced havedevelopedastrongbaseathome. Inthecaseof leveloftransparencyandpredictability. Overall,physical ontheirlearningcurve,andarecapableofformulating telecommunication,theyhavealsodevelopedtheability safety,adequateprotectionbythelaw,andqualityoflife andimplementingtheirglobalorregionalstrategies,and toefficientlymanagetheregulatoryprocess,particularly areimportanttoinvestors. developingandimplementinginvestmentprojects. Oth- intheirneighboringcountries. ers,withlessexperienceinFDI,finditmoredifficultto Challengesintheirownhomecountries formulatetheirstrategyandpackagetheirdomestically Inmarketsegmentswherethelevelofcompetitionhas developedcomparativeadvantagesintoprojectsthatfit increaseddomesticallyandprofitmarginshavedimin- ComparedtotheirNortherncounterparts,Southern inwiththeculture,marketcharacteristics,andregulatory ished,firmshavealsosoughtgrowthabroad.Chinese MNCsfacechallengesintheirhomecountries,asmany environmentofforeigncountries. ManysuchMNCs firmsinconsumerelectronicsandhomeapplianceshave developingcountriesdonothavepoliciesandaninsti- sawtheircomparativeadvantagesquicklyeroding,and seenthedomesticmarketapproachingsaturationand tutionalinfrastructuretosupportoutwardFDI. China, re-assessedtheirstrategyandprojectsinlightoftheir haveinvestedinAsiaandbeyond,includingindeveloped India,SouthAfrica,amongothershavevariouslevelsof lessonslearned. Observersincludingbanksindeveloped markets. Forsimilarreasons,Indianfirmsincarbonblack capitalcontrols,requiringadditionalregulatoryburdento countriesbelievethatMNCsinEMCshavetendedto andsteel,andMalaysianfirmsinutilitiesarealsoseeking accessforeignexchange.Suchcountrieslackthelevelof overbidforassetsduetotheirlackofexperienceand investmentopportunitiesabroad. financialmarketdevelopment,andoptionsandsophisti- narrowersetsofstrategicoptionsavailabletothemat cationoffinancialinstrumentsthatexistintheNorth.For thisstageoftheirquestforglobalization. Thisisnotan Accesstostrategicassets example,inadditiontoburdensomeandlessthantrans- unusualphenomenon:U.S.andJapanesefirmsexperi- parentcapitalcontrolprocedures,China'sregulations encedsimilarchallengeswhentheystartedtoventure Intheirquesttoexpandinternationally,manySouth- requireitsMNCs,whetherstate-ownedornot,tosubmit abroadafterWorldWarII,andinthe1970sand1980s. ernMNCshaveinvestedabroadtoacquirestrategic tothreeseparateagenciesawholesetofdocuments, Thequestionishowtotakeadvantageofpastexperience assets. Withveryfewinternationallyrecognizedbrand includingcertificateofestablishmentofthefirminChina, andtheservicesprovidedbyvariousinstitutions,includ- namesoftheirown,ChinesefirmssuchasLenovoand contractsoragreementsrelatingtotheoverseasproject, ingmultilateralones,tominimizethe"entryfees"of TCLhaveacquiredwell-knownWesternbrandnames variouselementsofaprojectfeasibilitystudy,2assess- SouthernMNCsintheglobalmarket. suchasTompson,RCA,andIBM. Haier'sattempttobuy mentoftheprojectmadebytheChineseembassyin Maytagwasnotonlyforitsbrandname,butalsoforits thehostcountry,andauditedfinancialreportsandbank Asummer2005surveyof150Chinesefirmsoperating distributionchannel. ComparedtootherSouthernMNCs, statements. Investorsarealsorequiredtoreportannually abroadshowsthataboutfiftypercentofrespondents ChineseMNCsseemstohavemademoreattemptsto ontheirinvestmenttotheMinistryofCommerce. Those saidthattheyhavefacedimportantorveryimportant acquirewell-knownbrandnames.Thisstrategywasnot factorshavediscouragedorevenpreventedmanysmall- challengesinunderstandingthehostcountry'sculture, followedbyJapaneseandKoreanbuddingMNCsthat andmedium-sizefirmsfrominvestinginChina. Theyhave monitoringandreactingquicklytochangesonthe developedtheirownbrandnamesinthesecondhalfof insteadpushedlargerfirmstouseoffshoreplatforms,like ground,andaccessingprojectfinancing. Withtheexcep- lastcentury. HongKong,fortheirforeigninvestment. tionofquality-priceratio,thelistofadvantageslistedby thosefirmsintheirdomesticmarketshrunksubstantially 2 whenappliedtotheiroverseasoperations. Thislistin- InOctober2004,theMinistryofCommerceissuedaregulationexemptingoutwardinvestorsfromsubmittingaprojectfeasibilitystudy. Other relevantagenciescontinuetorequirethesubmissionofmanyelementsofafeasibilitystudy. cludedbrandname,technology,humanresources,access tomarketinformation,knowledgeofpoliciesanddistri- smoothingtheentryoftheirNortherncounterpartsin productionsystemsarebecomingamustratherthana butionchannels. Accesstofinancehasbeenaparticularly developingcountries. Forexample,Northerninvestors choiceforSouthernMNCsduetoincreasedcompetition challengingexerciseforthosefirms. Whileawareof partneringwithChileancompaniestoinvestinLatin athomeandabroad. politicalrisks,firmsdidnotbuyinsurancetocoverthem, Americaearnedhigherrateofreturntotheirinvestments. ortakeotheradequatemeasurestohedgethem. Furthermore,likeCarrefourinvestinginEgyptfromDubai, Learnmoreaboutthisphenomenon NorthernMNCsusetheiroperationsintheSouthasa Theimpactofthegrowingphenomenon basetoexpandtheirbusinessinneighboringdeveloping Tenyearsfromnow,howwouldSouthernMNCsaffect ofSouthernMNCsondevelopingcountries countries. theglobaleconomy,andthedevelopmentofdeveloping countries­theirownandothers? Wouldweseemajor TheemergenceoftheSouthasasubstantialsourceofFDI South-SouthFDImaynotalwaysbefavorablefor differencesinstrategiesandbehavioramongSouthern fordevelopingcountrieshasimportantimplicationsfor thehosteconomy.Overtheyears,manyNorthern MNCs,andifso,wouldtheybedrivenbynationalities, theireconomicdevelopment.First,South-SouthFDIrep- MNCshaveparticipatedininitiativestoimprovetheir sectors,orotherfactors? Fornow,muchofthegrowing resentsanopportunityforlow-incomecountries. Apart transparency,environmentalandlaborstandardswhile effortoflearningaboutthisphenomenonhasbeento fromtheextractivesector,NorthernMNCsarelesslikely investingabroad.However,theseinitiativesareyettobe attempttomapitout­findoutwhoisdoingwhat, toinvestinsmallmarketeconomies,whereasSouthern implementedbymostSoutherncompaniesthattendto where,andtestafewhypotheseshereandthere. This MNCstendtoinvestinotherneighboringdeveloping havelowerenvironmentalandlaborstandards.Anydis- initialefforthasbeenchallengedbythelackofdata. countrieswithasimilarorlowerlevelofdevelopment tortingmeasuresgrantedbyhomecountrygovernments, Ingeneral,completeandreliableinwardFDIdatafrom thantheirhomecountry.South-SouthFDIflows,however oftentotheirstate-ownedenterprises,arelikelytohave developingcountriesishardtofind,andevenmoresofor small,maybesignificanttomanypoorcountries.For negativeeffectsonhostcountryeconomies. Geo- theiroutwardFDI. Thisnewandgrowingphenomenonis example,Lesotho,Mongolia,andNepalhaveattracted graphicandculturalproximitydonotalwaysguarantee boundtoaffecttheeconomicdevelopmentofdevelop- FDIfromtheirneighbors.India(inhotelsandmanufactur- betterrelationships. Historicalfactorsorthebehavior ingcountries,homeandhosttoFDI. Itisintheinterest ing)andChina(inmanufacturing)accountformorethan ofinvestorsmaycausefurtherskepticisminthehost ofthosecountriestolearnmoreaboutitanddealwithit, halfoftheFDIcomingtoNepal. MostFDIinMongolia economytowardforeigninvestors. Ofcourse,itremains andforthattheyneedtoenhancetheirFDIdatacollec- originatesfromChinaandRussia. thehostcountry'sresponsibilitytoimproveitsbusiness tionandmanagementsystems. environmentandregulatorysysteminordertorealize Second,SouthernMNCstendtouseresources,technolo- thedevelopmentpotentialofFDI,whiletakingnecessary gies,products,andservicesmoresuitabletothemarkets precautionstominimizethenegativeimpactsofFDIthat REFERENCES andthelevelofeconomicdevelopmentofdeveloping areindependentofthesourcecountry. countries. Forexample,TCLproduces$50televisionsets Aykut,Dilek,"FDIintheoilsector."Forthcoming,2006. inVietnamandMarutiSuzukiproducesa$2,000carin TheimpactofoutwardFDIonhomeeconomiesof India. NarrowertechnologicalgapsbetweenSouthern developingcountrieshasnotyetbeenassessed. 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