Monday, May 02, 2005

Where are the developing world's external savings going?

The Asia Times has an interesting article about multinationals from developing countries.
Companies from India, China, Brazil and Malaysia are among those busily investing around the world. According to the annual World Bank report titled Global Development Finance released recently, their reach is fast spreading. Developing countries (as defined by the World Bank, which includes middle-income countries such as Malaysia, but not richer ones like Taiwan, Singapore, Hong Kong or South Korea) made US$16 billion of foreign direct investment (FDI) in 2002. Last year, according to the bank's estimates, companies from these countries invested around $40 billion. Not all of these investments, though, went to the rich world. The bank's economists estimate that by the end of the past decade, more than a third of the FDI going to developing countries came from their peers.
As the developing world's external balance improves (it's not just Asia that runs a current account surplus, but also countries like Brazil), these countries are becoming important sources of capital for each other and also for the developed world. Thus, you have Indian companies investing in Brazil, Mexican companies investing in Indonesia, and Chinese companies investing in the US.
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