четверг, 12 мая 2011 г.

The New Geography of Capital Flows - is a new research of SKOLKOVO

In their new study researches from SKOLKOVO Institute for Emerging Market Studies (SIEMS) draw a general picture of recent trends in global capital flows. While detailed data is scarce, the analysis suggests that middle and low income countries have become more prominent in the global geography of capital flows in recent years. China, Russia, Malaysia, South Africa and Brazil are among the middle income countries and India and Nigeria are among the low income countries driving this recent phenomenon.

The findings suggest that the South has in the last decade emerged as a destination but also as a source of Merger&Acquisitions (M&A) flows. South-South deals have soared suggesting greater integration of the region. Although the share of southern deals directed to the North are getting smaller relatively to the share of southern deals directed to the South, the weighted average income per capita of southern countries in South-North deals are considerably lower than those in South-South deals suggesting that relatively poorer countries among the South are pushing the increase in the South-North integration. Overall the BRICs (Brazil, Russia, India, and China) and a reduced set of emerging countries, including Malaysia and South Africa, are behind this new phenomenon of the South as a source of foreign direct investments. The same set of countries plus Ukraine, Indonesia, and Mexico are the favourite destination among the M&A deals targeting the South.

Overall, the priority sector for firms in the South seems to be similar whether they reach a firm in the South or the North. Investments in materials, financial, and industrial sectors account for 45% to 50% of the number of deals. However, there are important differences when looking to the sectors that are not among the top in terms of the number of deals. Consumer staples and energy and power have a higher share among South-South than among South-North deals while the opposite happens in more advanced sectors such as high technology, healthcare, and media and communications. This suggests that South firms reach North companies to both access new markets and technology, and target South companies for raw materials and traditional markets.

The key findings are:

• Russia (11.6%), Malaysia (10.6%) and India (8.3%) are the leaders among South countries investing in the South. China replaces India in the top three when we take into account the reported value of South-South M&A deals.
• Among South-North deals, India and China are the top investors with 20.2% each of all South-North M&A deals, followed by Malaysia and Russia
• BRIC countries are the top four countries in term of destination of North-South deals. China is the main recipient both in terms of number of deals (17.1%) and value (12.6%) followed by Russia (9.3% and 12.6% respectively)
• South-South deals are less concentrated with India the top destination (9.4% of the total number of transactions), followed by Indonesia, Russia, and Ukraine all with a 5.4% share.

The recent growth in foreign direct investment (FDI) flows to and from developing countries raises a number of questions. First, is the growth in FDI flows from the South a lasting phenomenon? What are the implications of the development of global and transnational production networks initiated by recent M&A transactions? Even if the pace of M&As were to slow down, the effects of cross-border activity brings an opportunity for the private sector in developing economies to tap into new markets, to access new technologies and resources, to spread risks, to reduce costs, and to increase competitiveness. The challenge is to see how different sectors and economies can benefit from this new wave of crossborder activity and, whether regional trade agreements, preferred trade and investment agreements and other types of trade and investment agreements could be used as useful vehicles for increasing investment cooperation of this kind.

More detailed information can be found in SKOLKOVO's survey.

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