Structureofthesystem-ICRIER.ppt

Motivation: FDI flows to developing countries surged during the last two decades Motivation: There have been considerable changes in FDI flows FDI in Services Sector has increased since the 1990s… …there is a significant variation among developing Asia As conventionally defined, services sector includes: Infrastructure (Electricity, Gas, Water, Transport, Storage, and Communication) Finance and insurance Trade Repairs Business Services Real Estate Others Factors behind the increase in services-FDI Income growth Technological progress Changes in investment and trade policy The sectoral composition of FDI mirrors that of GDP in most countries Factors behind the increase in services-FDI Income growth Technological progress Global production networks Increased tradability of services (outsourcing) Changes in investment and trade policy Factors behind the increase in services-FDI Income growth Technological progress Changes in investment and trade policy Unilateral liberalization Bilateral and regional agreements Commitments under the WTO and General Agreement on Trade in Services (GATS) Service sector has been liberalized much later than manufacturing FDI restrictions in services are higher in Asia compared to other developing countries Some sectors are more restricted than others… As bulk of services FDI came as privatization and mega MA transactions, the role of MA as a form of FDI increased Global MA rose more than five-fold between 1995 and 2000 to a peak of $1.1 trillion in 2000, before dropping by some 45 percent in 2001 with the decline in stock markets and the global economic slowdown. The bulk of the cross-border MA transactions continue to be in service sectors (more than half in finance, transport, storage, and communications alone). Extensive privatization of state-owned assets in developing countries during the late 1990s in Latin America and Eastern Europe. Reflecting the recent favorable economic conditions, global cross-border MAs reached to yet a