By Ian Boyne

Global foreign direct investment (FDI) again surged last year, growing by 38 per cent to reach US$1,306 billion, with the United States overtaking Britain as the largest recipient of FDI flows, while China topped the list of developing countries in terms of FDI receipts. FDI inflows to developed countries accelerated by 45 per cent last year, reaching $857 billion, reflecting another big rise in cross-border mergers and acquisitions, with the United States, buoyed by its competitive currency, attracting $175 billion. As an indication of increasing liberalisation of foreign investment regimes globally and the scramble for the FDI dollar, some 147 policy changes were made by host countries, with most of them (74 per cent) implemented by developing countries.

These are some of the facts revealed in the latest World Investment Report which was released last week by the United Nations Conference on Trade and Development. The most authoritative source on global investment annually, the report which records the performance of foreign direct investment for the previous year this year focuses on 'Transnational Corporations, Extractive Industries and Development'. Three Critical Reports
The World Investment Report is one of three critical global reports which were issued in the same week. The other two are the World Bank's World Development Report which this year has the theme 'Agriculture for Development' and the International Monetary Fund's World Economic Outlook which focuses on 'Globalisation and Inequality'. All three reports represent significant sources of information and are usually eagerly anticipated by development specialists and journalists covering development and international economic issues.The World Investment Report again demonstrates how highly skewed FDI flows are, despite the 'race to the bottom' phenomenon often observed among developing countries fighting aggressively for the FDI dollar. Outside of the developed countries, Asia, the transition economies and some of the large economies in Latin America as well as the oil-rich Arab states, very little is going to developing states. Fortunately, Africa has been seeing significant increases - but the continent is coming from a very low base. The region last year attracted FDI inflows of $36 billion, twice its flows in 2004.

The boom in Asia continues. FDI inflows to South, East and South-East Asia increased by 19 per cent to reach a new high of $200 billion. China and Hong Kong are the largest recipients in the region, though inflows dipped by four per cent in China for the first time in seven years. Yet China attracted $69 billion while Hong Kong pulled in $43 billion and Singapore recorded a new high of $24 billion. India chalked up a respectable performance by raking in $17 billion in FDIs - the equivalent of the combined inflows of the preceding three years.

FDIs Increased
Significantly, outflows of FDIs from the region increased by a whopping 60 per cent to reach $103 billion. Outflows from Hong Kong, the largest source of FDIs within the region, rose by 60 per cent to reach $43 billion. Says the World Investment Report: "Rapid economic growth in South East and South-East Asia should continue to fuel growing market-seeking FDI to the region. "The region will also become more attractive to efficiency-seeking FDI as countries such as China, India, Indonesia and Vietnam plan to significantly improve their infrastructure."

FDI outflows from the developed countries grew by 45 per cent, reaching $1 trillion. The United States and France are the two leading investors in the world, "while Spanish companies continued their outward expansion at a rapid pace to reach $90 billion, the largest ever recorded for Spain". (Thankfully, Jamaica has been getting some of that.) "The upward trend in FDI is expected to continue in 2007 and beyond . This is in line with global economic growth ." The forecast has already been confirmed by the rise in global mergers and acquisitions which reached $581 billion in the first half of 2007 - a 54 per cent increase over the corresponding period last year.

But the World Investment Report warns that despite the generally positive prospects, several challenges and risks face the world economy which may have implications for FDI flows in 2007 and 2008. These include global current account imbalances causing exchange rate shifts, the volatile oil prices and a potential tightening of financial market conditions."

Strong Sustained Growth
This leads us to another critical report issued this week, The World Economic Outlook, published by the IMF. The report sparkles with optimism and notes that "from 2002 to the present, the world economy has enjoyed its strongest period of sustained growth since the late 1960s and early 1970s, while inflation has remained at low levels. Not only has recent global growth been high but expansion has also been broadly shared across countries.The volatility of growth has fallen . " But the report also warns, like The World Investment Report, that "the prospects for future stability should, however, not be taken for granted". The report focuses on 'Globalisation and Inequality', which is particularly revealing coming from the IMF. One of the most important chapters is the one dealing with the issue itself - globalisation and inequality.

When I saw the names of the economists who contributed to the chapter I was delighted to note that one of the most rigorous development economists, Nancy Birdsal, was named among them. I am happy to see that a Bretton Woods institution like the IMF could rely on the consultancy work of this bright and progressive economist. Noting that world trade has grown five times in real terms since 1980 and that the share of world GDP has risen from 36 per cent to 55 per cent over the period, the chapter observes also that financial globalisation has "proceeded at a very rapid pace over the past two decades." Total cross-border financial assets have more than doubled, from 58 per cent of global Gross Domestic Product in 1990 to 131 per cent in 2004. So far, so good.

Inequality on the Rise
But based on the observed movement in the Gini coefficient (the most widely used measure of inequality), "inequality has risen in all but the low-income country aggregates over the past two decades". Continues the World Economic Outlook: "Among the largest advanced countries, inequality appears to have declined only in France, whereas among the major emerging countries, trends are more diverse with sharply rising inequality in China . " Continues the IMF report significantly: "The recent experience (of increasing inequality) seems to be clear change in the course from the general decline in inequality in the first half of the 20th century". In general, says the report, researchers have found that patterns of trade liberalisation have contributed to increasing the earnings gap.

The IMF report is not knocking globalisation and is quick to point out that technological change and the skills gap result in the growing inequality. We now come to the third and perhaps most important report issued last week, the World Bank's annual masterpiece, the World Development Report this year, titled 'Agriculture for Development'. The report says forthrightly: "If the world is committed to reducing poverty and achieving sustainable growth the prospects for agriculture for development must be unleashed. Promoting agriculture is imperative for reducing world poverty . it has proven to be uniquely powerful in that task". The World Bank tells us that effectively utilising agriculture for development is essential to the meeting of the Millennium Development Goal of halving poverty and hunger by 2015 in poor countries. Some 75 per cent of the world's poor are in rural areas and agriculture is the source of livelihood for 86 per cent of rural people. Some 2.1 billion people are living on less than US$2 a day.

The World Bank is not diffident about rejecting the minimalist state of neo-liberal economics, stating categorically that while agriculture "offers great promise for growth, poverty reduction and environmental services", "securing this promise requires the visible hand of the state - providing core public goods, improving the investment climate, regulating natural resource management and securing desirable social outcomes". The World Bank makes it clear, too, that international institutions have to be supportive of agricultural development in developing countries. "The agriculture-for-development agenda cannot be realised without more and better international commitments. The global agricultural agenda has a multiplicity of dimensions: Establishing fair rules for international trade, providing R and D spillovers for the benefit of the poor and mitigating and adapting to climate change".

Complementary Policies
The World Bank says, "The Doha Round of trade negotiations must urgently be concluded, particularly to eliminate distortions such as the U.S. cotton subsidies, important to the poorest countries. Complementary policies and programmes (including aid-for-trade) are needed to compensate losers (transfer programmes) to facilitate rapid and equitable adjustment by smallholders to emerging comparative advantages." The World Development Report 2008 says the prospects for agricultural development are brighter today than they were 25 years ago when the report first focused on agriculture. "The anti-agriculture bias in macro-economic policies has been reduced, thanks to broader economic reforms. There is also evidence that the political economy has been changing in favour of agriculture and rural development. Both rural civil society organisations and the private sector in agriculture value chains are stronger than they were in 1982. The private agri-business sector has become more vibrant. New, powerful actors have entered agricultural value chains and have an economic interest in a dynamic and prosperous agricultural sector and a voice in political affairs".

No one interested in a useful discussion on agriculture in the global economy can afford to be without the World Development Report 2008. Our new Minister of Agriculture should be among the first to get his copy. And people from the political directorate as well as the technocrats - and, yes, certainly the financial analysts and journalists covering business and finance - need to have all three global reports which shake us out of our self-imposed cocoon and provincialism.