Revisiting Bilateral Foreign Direct Investment Inflows into BRIC Economies

Abstract

Tracking the origins of bilateral foreign direct investment (FDI) flows is required to understand de facto real linkages between countries, which remains an important area of research and policy concern. However, existing bilateral FDI data may fail to correctly identify the original sources of FDI flows because they are based on flow of funds rather than ultimate ownership. As a consequence, several offshore financing centers (OFCs) and tax havens emerge as top sources of FDI flows which provide a misleading picture of bilateral real linkages between countries. In this context, this paper proposes an alternative framework to overcome this problem by examining data on mergers and acquisitions (M&As), which offers a far more informative geographical breakdown of sources of FDI inflows. The paper reconciles bilateral FDI inflows data with M&A data for the BRIC economies covering Brazil, Russia, India and China, for the period 2001–12. Further, in light of the increasing M&A flows to BRICs, of equal policy importance is the issue of what kind of FDI should the BRICs attract. In this regard, the paper also sheds some light on the macroeconomic policy implications of the different kinds of FDI flows to the BRIC economies.

Capital Round-Tripping: Determinants of Emerging Market Firm Investments into Offshore Financial Centers and Their Ethical Implications

“…For many emerging market multinationals (EMNEs) offshore financial center (OFC) investments constitute a large proportion of its FDI activity (UNCTAD, 2017, p. 12) and FDI from OFCs often accounts for the majority of emerging market inward FDI (Gopalan & Rajan, 2016). A key characteristic of OFC investments from emerging economies is its round-trip nature (Aykut et al, 2017).…”

“…Roundtripping activities are estimated to represent from 10 to 50% of FDI activities from emerging economies such as Brazil, India, Russia, and China (Aykut et al, 2017). Despite the interest in determinants of FDI in OFCs in general (Buckley et al, 2015;Chari & Acikgoz, 2016;Gopalan & Rajan, 2016;Haberly & Wójcik, 2015a, 2015bPérez et al, 2012), few studies have focused on round-tripping as an important part of EMNE activities (for exceptions see Fung et al, 2011;Ledyaeva et al, 2015;Sutherland & Anderson, 2015). Because of this we know little about the theoretical drivers of investments into OFCs for round-tripping activities, the trade-offs EMNEs make when choosing between various OFCs, or the ethical implications of these investments.…”