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INSIGTHSINTOTHESUSTAINABLEGROWTHOFBUSINESS
November1921,2009 b
FOREIGNDIRECTINVESTMENT
TOWARDSFASTGROWINGECONOMIES TOWARDS FAST GROWING ECONOMIES INTHEGLOBALCRISISCONTEXT
ANANALYSISTODECISIONAPPROACHAPPLICATION
Jean PaulLemaire JeanPaul Lemaire
ESCPEurope
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AGENDA
Whatisatstake:reciprocalinterests? Purposeandcontext:FGE,CrisisandFDI Context:initialtopresent Chosenapproach:fromenvironmentanalysistoentrydecision PositioningFGEonthegrid Ongoingconsequencesofthecrisis O i f th i i
LOCALISATIONDECISION ANDDETERMINATIONOFENTRYSTRATEGY
Initial context of the approach (1) : from progressive integration to local Crisis p g g
Thisconfrontationofcountryandcorporateapproachestakesplaceinavariety Thi f i f d h k l i i ofgeo/eco/politicalcontexts,characterizedbyareaandtimeframedifferences, forinstance,
Progressiveintegrationintoaworldeconomicopencommunity,allowingtoenvisage anorganizedintensificationofFDIflows ex.VietnamfacingWTOintegration (NguyenNhu&Haughton,2002) Consecutivereintegrationfollowingacyclicalshock thatprovokedforatimeadrying upofFDIbeforetheirresumptioncanbeconsidered Argentinareintegrationafter2001crisis. g g f (Carreraetal.,2003)
Present context of the approach (2) : from Global Crisis to post crisis p
Addressingearlyassessmentsassumingthatdecoupling wouldprotectFast GrowingEconomiesfromthefinancialcrisis:
Due to the limited financial links existing with Western economies and the DuetothelimitedfinanciallinksexistingwithWesterneconomiesandthe unsophisticatedFGEfinancialsystems, Due also to limited opening level already reached and geocentric development Duealsotolimitedopeninglevelalreadyreachedandgeocentricdevelopment whichcouldbedominatingintheseareas
Inordertoevaluatemoreimportantbutdifferentiatedimpacts,
R f i t Referringtocontrastedsituationsfromacountrytoanother,fromasectorto t t d it ti f t t th f t t another, ButintroducingnewpossibilitiesforFDIandevolvingpositioningofcountriesin thatperspective
SUCCESSIVESTEPS
Hence,thisexploratoryqualitativeapproachreliesontwocountrycasestudies , p yq pp y (VietnamandArgentina)andongoinglargeranalysis (BRIC) Applyinganenvironmentanalysistodecisionframework(PREST) A l i i l i d i i f k( S ) LeadingtotwopossiblediscriminatingaxesidentificationtopositionFGEsin Leading to two possible discriminating axes identification to position FGEs in termsofFDIattractiveness Inordertosuggest,
furtherindepthdevelopments(indexesselection,validationandmeasurement) andsystematizationtoalargerFGEset(egBRIC)andtoothereconomiccontexts(eg and systematization to a larger FGE set (eg BRIC) and to other economic contexts (eg globalcrisis)
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ANINDUCTIVEAPPROACH
FromaFDIsexpansionperspective,twocaseshavebeen,then,consideredin ordertostructuretheanalysis,
ThecaseofthelongprocessofVietnamjoiningtheWTO(Lemaire&Bui,2005/2008) ThecaseofthegradualshorterreopeningprocessofArgentinaafterthecrisisofDecember2001 (LemaireandLopez,2007)
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STEP1: ENVIRONMENTTODECISIONAPPROACH
Suggestinganapplication,inparallel,ofaPREST analysis, S ti li ti i ll l f PREST l i inanenvironmenttodecisionanalysisperspective(Lemaire,1993,2000,1997/2003):
Relying,first,ontheidentificationofexternalpressuresexertingoneachlocalenvironment Inorder,then,toevaluatetheresultingchallengesfacedbylocalauthoritiesandforeigninvestors Leading,atlast,totheidentificationofsectors/modesofpresencebestsuitedtoeachcontext
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ANALYSIS
PRESTMODELAPPLYINGTOFDI
EXTERNALPRESSURESONFDI FDICHALLENGES FDIDECISIONS
POLITICALREGULATORY PRESSURES
COMPETITION
WITHOTHERFDIHOSTS
TECHNOLOGICAL PRESSURES
CHALLENGE
LOCATION ENTRYMODE LEVELOF COMMITMENT
DECISIONS RE REDEPLOYMENT
OFACTIVITIES&GEOTARGETS
ADAPTATION
OFTHELOCALOFFER
CHALLENGE
FDI
CHALLENGE
ECONOMIC&SOCIAL PRESSURES
EXTERNAL PRESSURES
WITH EITHER POSITIVE OR NEGATIVE IMPACT ON FGEs FDI ATTRACTIVENESS
FROM OUTSIDE
FROM INSIDE
measuresofde/reregulationdesigned toadapttheframeworksupporting y p , FDIlikelydevelopment, measuresofprivatisation andrestructuringofthepublicsector and/orStateOwnedcompanies adjustmentpoliciesofthemajor infrastructuresectors infrastructure sectors (transport,fin.services,distribution..)..
STRUCTURAL LongTerm
TIME PERSPECTIVE
CONJECTURAL ShortTerm
abruptchangesoftheinternational abrupt changes of the international financialauthoritiesonthe creditworthinessofthecountry exposuretoeconomiccrisesand politicaldisturbancescomingfrom outside d
sensitivitytopoliticaltensions y p (crossborder,terrorism)fromtheregion orbeyond.. stabilityofthepoliticalsystem,State commitmentsandeconomicpolicies continuity, continuity strikesandsocialmovements, interethnictensions,xenophobic outbreaks.. naturaldisasters..
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EXTERNALPRESSURES
WITHEITHERPOSITIVEORNEGATIVEIMPACTONFGEsFDIATTRACTIVENESS WITH EITHER POSITIVE OR NEGATIVE IMPACT ON FGE FDI ATTRACTIVENESS
ECONOMIC&SOCIAL
ORIGINATING
FROM OUTSIDE
-
THECOUNTRY
-
FROM INSIDE
STRUCTURAL LongTerm L T
foreignexpectanciesforbetter environmentandethicalproduction environment and ethical production conditions longlastingunder evaluation offoreign competitors currency Improvementoflocalassetsinother countrieshostingFDI reallocationofMNCscorporateFDI portfolio
Populationdynamicsin/decreasinglocal demandandlabourforce demand and labour force costeffectiveness evolutionofpurchasingpower,middleclass developmentandpovertyreduction In/decreasedavailabilityandaccessibility ofnaturalresourcesintheMT/LT / permanenceofpracticesdistorting freecompetition(ex.corruption,State preferenceforlocalactors)..
TIME PERSPECTIVE
CONJECTURAL ShortTerm
currencyfluctuationsand rawmaterialsandcommodities worldpriceschanges dryingupofforeignfundingdueto y g p g g foreignfinancialcrisis abruptshiftsofforeigncustomers tastes(fashion) foreigndemandfluctuationforproducts andservices(elasticity+/)dueto and services (elasticity +/ ) due to ecomovesaffectingcustomerscountries
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EXTERNALPRESSURES
WITHEITHERPOSITIVEORNEGATIVEIMPACTONFDI
TECHNOLOGICAL
ORIGINATING
FROM OUTSIDE
-
FROM INSIDE
STRUCTURAL LongTerm
compliancewithinternationalstandards ofquality,environmentandsafety ( g (e.g.ISOstandards) ) complianceforlocalproductsandservices withthemostdemandingcertification systems(USandEU) logisticalcapability(controlofthesupply chain,justintime,traceability..) chain justintime traceability )
TIME PERSPECTIVE
CONJECTURAL ShortTerm
existenceoflocalcompetencies developedthrougheducational system(bothforproductionasfor managementandorganisation) d i i ) levelofinfrastructureswithin thecountryandconnectivitywiththe RoW(roads,telecommunications, energysupply,inwater,portand airportfacilities..) accesstoITandcommunicationsystems (forex.broadbandInternet)as informationprocessingcapacities abilitytoadaptand/ortransform ability to adapt and/or transform technologyoriginatingfromexternal sources, developmentpotentialoflocalR&D (resourcesandstructures)relatedto tointernationalresearchnetworks t i t ti l h t k
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Forforeigninvestors:becomeanacknowledgednativeplayer
.gainingaccesstomarketshare/factorsofproductionadvantages p p .assumelocalcompetitionanditspractices
POLITICALREGULATORYPRESSURES
TECHNOLOGICALPRESSURES
Forlocalauthorities: Optimizeinternal/externalpositioning l/ l
.redefine thegeosectortargets .redefinethe countryconcept visvis theexterior..
COMPETITION
LOCATION ENTRYMODE LEVELOF COMMITMENT DECISIONS
RE DEPLOYMENT
ADAPTATION
Forforeigninvestors: Displayingproperlyresourcesandreturns
.optimisetheirportfolioofinternationallocations .adapt/optimizetheirofentrystrategychoices..
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IndexestobeselectedinconnectionwithmajorFrenchECA
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EXPLORATORYDYNAMICMAPPINGOFFGEs FDIATTRACTIVENESS
Thisstepbystepanalysistendstoimplythattwomajorfactorscouldbe h b l d l h f ld b retainedtodifferentiatethevariousFGEasFDIstargets
infrastructurelevel,largelylinkedwiththestructuraldimensionsofallthreesetsof externalpressuresofthePRESTmodel andinstabilitysensitiveness,largelylinkedwiththeirrespectiveconjecturaldimensions
GeneratingspecificchallengesineachFGE,itsuggests
tothehostingcountriesauthorities,somedirectionstobefollowedinordertoupgrade theirpositioningandtoattractthemostappropriateinvestments,throughdeveloping,
either,abettercontrolofthecountryssensitivitytoinstabilityandconjecturalshocks, and/or,measurestoupgradethelargespanofinfrastructuresexpectedbytheirhosts
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THE4xiMODELFOURBOXES
EXPLORATORYDYNAMICMAPPINGOFFGEsFDIATTRACTIVENESS
INSISTENT
Combining: Highlevelofcontrolinstability andofconjecturalshocks Relativelylowlevelof infrastructure
INDISPUTABLE
Combining: - High level of control instability and conjectural shocks - Already high level of infrastructure
IMMATURE
Combining: Low level of control instability and conjectural shocks
INOPERATIVE
Combining: Low level of control instability and conjectural shocks Already high level of infrastructure
Levelofinfrastructuretoupgrade
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THE4xiMODELFOURBOXES
INITIALLYEXPLOREDCOUNTRIESPOSITIONNING
INDISPUTABLE
Combining: - High level of control instability and conjectural shocks - Already high level of infrastructure
INSISTENT
VN
Combining: Highlevelofcontrolinstability andofconjecturalshocks Relativelylowlevelof infrastructure
IMMATURE
Combining: Low level of control instability and conjectural shocks
INOPERATIVE
Combining: ARG Low level of control instability and conjectural shocks Already high level of infrastructure
Levelofinfrastructuretoupgrade
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THE4xiMODELFOURBOXES
exploratoryBRICcontrastedregionalapproach(1) p y g pp ( ) +
INSISTENT INDISPUTABLE Coastal China Capacityto control instability instability and conjectural shocks Southern Brazil SW India IMMATURE Western Russia INOPERATIVE
Levelofinfrastructuretoupgrade
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THE4xiMODELFOURBOXES
exploratoryBRICcontrastedregionalapproach(2) p y g pp ( ) +
INSISTENT INDISPUTABLE
Central China Capacityto control instability instability and conjectural shocks Northern Brazil IMMATURE NE India Eastern Russia INOPERATIVE
Levelofinfrastructuretoupgrade
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THE4xiMODELFOURBOXES
FROMCOUNTRYPOSITIONING TOCORPORATEOPERATIONALIMPLICATIONS TO CORPORATE OPERATIONAL IMPLICATIONS
FGEPOSITIONING
Overallrecommended recommended Entrystrategy
INSISTENT
Sustainable targeted presence through partnerships Capitalintensiveenvisageable
Sectorsofinfrastructures(e.g.utilities)and goodsandserviceswithhugeexisting demand HORIZONTALISATION>VERTICALIZATION
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THE4xiMODELFOURBOXES
CORPORATEOPERATIONALIMPLICATIONS
INDISPUTABLE INSISTENT
Sustainable targeted presence through partnerships Capitalintensiveenvisageable Permanentdiversifiedpresence 100%subsidiary Capitalintensive
Allsectors withdomesticandinternational existingandpotentialdemand HORIZONTALIZATIONAND HORIZONTALIZATION AND VERTICALIZATION
IMMATURE
Limited/occasionalpresence Minimalcapital
INOPERATIVE
Conditional presence Throughpartnership Limitedcapital
Valorizationoflocaltangibleand intangibleresourceswithlimited exposuretodomesticdemand VERTICALIZATION> HORIZONTALIZATION
HORIZONTALIZATION> VERTICALIZATION
Levelofinfrastructuretoupgrade
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INOPERATIVE
CORPORATEOPERATIONALIMPLICATIONS
INDISPUTABLE INSISTENT
Sustainable targeted presence through partnerships Capitalintensiveenvisageable Permanentdiversifiedpresence 100%subsidiary Capitalintensive
Allsectors withdomesticandinternational existingandpotentialdemand HORIZONTALIZATIONAND HORIZONTALIZATION AND VERTICALIZATION
IMMATURE
Limited/occasionalpresence Minimalcapital
INOPERATIVE
Conditional presence Throughpartnership Limitedcapital
Valorizationoflocaltangibleand intangibleresourceswithlimited exposuretodomesticdemand VERTICALIZATION> HORIZONTALIZATION
HORIZONTALIZATION> VERTICALIZATION
Levelofinfrastructuretoupgrade
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INDISPUTABLE
CORPORATEOPERATIONALIMPLICATIONS
INDISPUTABLE INSISTENT
Sustainable targeted presence through partnerships Capitalintensiveenvisageable Permanentdiversifiedpresence 100%subsidiary Capitalintensive
Allsectors withdomesticandinternational existingandpotentialdemand HORIZONTALIZATIONAND HORIZONTALIZATION HORIZONTALIZATION AND VERTICALIZATION
IMMATURE
Limited/occasionalpresence Minimalcapital
INOPERATIVE
Conditional presence Throughpartnership Limitedcapital
Valorizationoflocaltangibleand intangibleresourceswithlimited exposuretodomesticdemand VERTICALIZATION> HORIZONTALIZATION
HORIZONTALIZATION> VERTICALIZATION
Levelofinfrastructuretoupgrade
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IMMATURE
CORPORATEOPERATIONALIMPLICATIONS
INDISPUTABLE INSISTENT
Sustainable targeted presence through partnerships Capitalintensiveenvisageable Permanentdiversifiedpresence 100%subsidiary Capitalintensive
Allsectors withdomesticandinternational existingandpotentialdemand HORIZONTALIZATIONAND HORIZONTALIZATION HORIZONTALIZATION AND VERTICALIZATION
IMMATURE
Limited/occasionalpresence Minimalcapital
INOPERATIVE
Conditional presence Throughpartnership Limitedcapital
Valorizationoflocaltangibleand intangibleresourceswithlimited exposuretodomesticdemand VERTICALIZATION> HORIZONTALIZATION
HORIZONTALIZATION> VERTICALIZATION
Levelofinfrastructuretoupgrade
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WHATABOUTTHECRISISEFFECTS?
GlobalmayhemhashitquitedifferentlyvariouslargeFGEandsectors:
TheexampleofVietnam: crisis,whatcrisis? ThecontrasteddiagnosisapplyingtoBRICs:
ReorientatesChinesepolicies ImpactsinalimitedwayIndia AffectssignificantlyBrazilbutwithinarelativelyshortperiodoftime LeavesRussiadesperatelydependentofnaturalresources Leaves Russia desperately dependent of natural resources
Butwithlimitedconsequences(atleastinsomeFGE)onFDI:
Differentialofgrowthremainequal(ifnotsuperior)betweenFGEandmature g q ( p ) economies(5%to7%),hencetheFGEattractivenessremainshigh FGEspoliciestendtobecomemorefocusedanddemanding(improvingtheir positioningonthetwoaxes):
capacitytocontrolinstability(tightereconomicmonitoring,higheconomicagentsmoral) it t t l i t bilit (ti ht i it i hi h i t l) acceleratedinfrastructureimprovements(Keynesianpolicies,inboundasmuchasoutbound)
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LIMITSANDFURTHERRESEARCH
Beyondthisexploratoryapproachfurtherresearchhastobepursuedin eyo d t s e p o ato y app oac u t e esea c as to be pu sued orderto, morepreciselyandcomprehensivelyidentifyandevaluatethe4xi modelstwoaxesindicators ECA moresystematicallycollectappropriatedatainordertopositionmore accuratelyeachFGEonthetwoaxesretained correspondent academics testandvalidatethegridincorporatecircles encompassingdifferent g p p g sectors
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THANKYOUFORYOURATTENTION! Q&A?
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