Transcript Document

Sustainable FDI in Asia
Challenges and Opportunities
International Conference on Sustainable
Investment in ASEAN
Bangkok, 7 March 2002
Maryanne Grieg-Gran
International Institute for Environment and
Development
Recent FDI Trends 2001
• Inflows to Asia down 13% from $144bn to
$125bn
• FDI to China and India increased
• FDI to Taiwan and Thailand stable
• Decline in FDI to Hong Kong, Korea,
Philippines and Malaysia
• Divestment in Indonesia continues
FDI Inflows ASEAN (US$mn)
15000
10000
1996
5000
1997
1998
0
po
r
e
nd
Si
ng
a
ila
ilip
pi
Th
a
ne
s
a
al
ay
sia
si
Ph
-10000
M
In
d
on
e
-5000
1999
Source: UNCTAD World Investment
Report 2001
2000
Distribution of FDI Flows 2000
Hong Kong/China
Republic of Korea
Singapore
Malaysia
Taiw an
Thailand
Other Asian countries
Source: UNCTAD World Investment
Report 2001
FDI Inflows as % of GDP 1999
80%
60%
40%
20%
am
bo
di
a
ia
In
d
C
hi
n
a
M
Source:UNCTAD World Investment
Report 2001
C
H
on
g
Ko
ng
-20%
al
ay
si
Ph
a
ilip
pi
ne
s
Th
ai
la
nd
In
do
ne
sia
0%
Origin of FDI Inflows to China
2000
Other
Free Ports
EU
US
Asia
China Investment Report 2000
Origin of FDI to Thailand 1996/7
Other
Europe
AsianNIES
US
Japan
Source: A Bende-Nabende and J.R.
Slater 1999
FDI Stocks in Asia by Sector
80%
70%
60%
50%
40%
30%
20%
10%
0%
1988
1999
Primary
Secondary
Tertiary
Source:UNCTAD World Investment
Report 2001
Top Sectors for FDI in Asia
• Indonesia (1995-1999)
– chemicals, electricity/gas/water, paper
• China (2000)
– Fastest growing sectors electronics/telecommunication
equipment and chemicals
• Thailand (2000)
– chemicals and paper, agricultural products, electric and
electronic products
ECAs in Asia
• ECGD (UK) 2000/01
– 25% of total exposure of EUR 41 bn is in China,
Indonesia,Hong Kong, and Malaysia
– EUR 500 mn of overseas investment insurance in Asia
(Indonesia and Philippines
• Hermes (Germany)
– >EUR 5 bn in 2000 export guarantee cover to Asia
– EUR 14 bn in investment insurance worldwide -China
one of 5 major focus countries
European DFIs
Commitments in Asia
• DEG (Germany)
– EUR 903mn in Asia/Oceania by end of 2000
– Indonesia, India, Philippines
• CDC (UK)
– US$348 mn in South Asia and Asia Pacific
• FMO (Netherlands)
– ca. US$400mn at end of 1998
– Philippines, Indonesia, Pakistan
Potential Benefits of FDI
• Economic
– Growth, technology transfer, foreign exchange, tax
revenue, access to expertise and markets, spillovers,
stability
• Social
– Employment, poverty reduction, capacity building
• Environmental
– Clean technology, efficient resource use, strict
environmental standards
Potential Disbenefits of FDI
• Economic
– High reliance on imports, minimal linkages, crowding
out of local enterprises, competition on incentives, rentseeking and corruption leading to inefficiency
• Social
– Use of expatriate staff, accentuation of inequality,
impacts on local community, poor working conditions
• Environmental
– Race to the bottom on standards, off-loading of old
dirty technology
What is Sustainable
Investment?
Investment that:
• Generates a competitive financial return for
investors
AND
• Contributes to national and local economy
• Brings social benefits and reduces poverty
• Is environmentally sound
Key Factors for Sustainable FDI
•
•
•
•
•
•
Host country policies
Market pressures and opportunities
Company philosophy and visibility
Investor/finance pressure and opportunities
Home country policies
International initiatives
The Opportunities: The Business
Case for Sustainable Investment
• Cost advantages
– Eg clean technology is more efficient; good working
conditions means higher productivity
• Market advantages
– Eg: Means of product differentiation; price premiums,
tapping new markets in the “survival economy”
• Reputation advantages
– Social licence to operate
Challenges for Sustainable
Investment
• Fending off competition from “free riders”
– Requires policy coordination
• Financing public goods
– Innovative approaches needed
• Dealing with long gestation periods
• Going beyond “safe projects”
Challenges in Assessing
Sustainability of FDI
• Establishing standards
– International versus local standards:assumption that
compliance with local legislation not sufficient or
practical
– One-size fits all approach not appropriate
– Need for wide stakeholder consultation
• Obtaining Information to assess FDI
– >440,000 foreign affiliates in S, E and S Asia
– EU has 33,249 parent companies with foreign affiliates
– Reliance on information supplied by the company
Challenges for Assessing
Sustainability (2)
• Assessing supply chains
– monitoring codes of conduct eg apparel codes
• Assessing the indirect impact of FDI
– eg impact of FDI in the finance sector
• Addressing long-term and uncertain impacts
– eg in mining
Information Tools
• Certification (eg FSC, SA8000)
– Proliferation of schemes causes confusion
– May not be appropriate for smaller producers
• Environmental management systems
– ISO 14000 increasing takeup in Asia but lacks
credibility as not performance-related.
• Environmental and Social audits
– problems of interpretation where no widely accepted
standards eg workplace standards
Conclusions
• FDI has an important role to play in sustainable
development in Asia
• Sustainable FDI can involve win-wins – but this is
not always automatic
• Action is needed from various stakeholders in FDI
to overcome the barriers
– To create an investment climate which incentivises
sustainable FDI
– To address definition of sustainability standards