Friday, October 26, 2012

The role of academic research in investment for development

Foreign direct investment (FDI), like investment in general, may be profitable and productive. But does it generate what economists call "spillovers" or "beneficial externalities"? For example, if a company builds a large factory, how likely is it that locals will become better technically qualified or start new businesses as a result? This is important if you are, as you should be, trying to maximize the development impact of a project.

Saturday, October 13, 2012

Beyond "CSR": Widening Responsibility

Companies all over the world proclaim adherence to the principles of corporate social responsibility (CSR) and/or sustainability. But what reallly is "CSR"? The brief explanation below is based largely on my experience with the OECD Guidelines for Multinational Enterprises, with governments trying to improve their investment policies, international organizations seeking to develop investment rules, and with corporations, labor unions and NGOs striving to influence the process, and is aimed more at practical usefulness than academic rigor.

Tuesday, October 9, 2012

Aid is not enough

Why is it necessary to mobiliize large quantities of private capital to invest in economic and social development in poor countries? Surely the rich countries' aid programs are already doing this?

Wednesday, October 3, 2012

Does investing abroad reduce investment at home?

A few years ago,  "outsourcing" became a dirty word in the United States. Now that emerging markets like China and India are becoming big outward investors, similar concerns are likely to be voiced in those countries, especially as their economic growth slows. While international investment is generally beneficial, these concerns are genuine and need to be met by positive policies to ensure that the benefits of FDI occur and that they are shared fairly.

Friday, September 21, 2012

Hello, y'all

I'm writing this blog post in Monroeville, Alabama. Two days ago I spoke at the Economic Summit in Dothan, some way east of here (if my memory serves me right -- this is the first time I've been to Alabama and I don't know its geography). Dothan is preparing to welcome its first ever Chinese delegation and is hoping to land some investment deals. 

Yesterday I was taken from Monroeville to Thomasville by the town's mayor, who brought me back at the end of the day after a "real Southern country cooking lunch" (not for slimmers) and a tour of the beautiful town and six industrial estates centered around the timber and pipe industries and taking advantage of rail spurs connected to the Norfolk Southern Railroad that can take exports down to the port of Mobile and northwards as far as Chicago and New York. 

Here is Mayor Sheldon Day:


Friday, August 10, 2012

Investment promotion is more effective for developing countries

According to Torfinn Harding and Beata Smarzynska Javorcik of the University of Oxford, investment promotion agencies (IPAs) are highly effective in attracting investment to less-developed countries and far less so in promoting investment between developed countries. A small amount spent on promoting investment in such countries brings in a huge return both in FDI inflows and in job creation.

How LDCs can receive more FDI

Article published last year by Vale Columbia Center on Sustainable International Investment:
Why and how least developed countries can receive more FDI to meet their development goals
by
Ken Davies*
The 48 least-developed countries[1] (LDCs), most of them in sub-Saharan Africa and a few in Asia, need foreign direct investment (FDI) to help meet their development targets. The FDI they now receive, although inadequate, is enough to demonstrate that investors see potential in them. It is therefore realistic for LDCs to seek more FDI, but they need to enhance their investment environments to attract it in the much greater quantities required. Donors can help by targeting official development assistance (ODA) on investment in human capital and supporting governance improvements. Meanwhile, LDCs should establish effective investment promotion agencies (IPAs).

Conflict and development: what to do?

This is a chicken and egg situation. Investors, both domestic and foreign, mostly shun conflict zones, which therefore tend to remain -- or become -- poor, providing few employment opportunities other than ones that make the situation worse (child soldier, terorrist).

Saturday, July 14, 2012

Development and freedom

There is a common view that a poor country can either have freedom or it can have development, not both at the same time. This is wrong because multifaceted freedom is both the objective of development and the means by which it is achieved.

Friday, July 13, 2012

Promoting investment (not just FDI)

Investment promotion is often seen purely as encouraging foreigners to invest in a country, especially in the form of foreign direct investment (FDI).

This may be necessary if a country is so poor that it has no domestic investors. But this is rarely the case. Many poor countries have unequal distributions of income and wealth so that although their GDP per capita is low there are some very rich individuals and families with fortunes that could be invested in their country. It's no surprise that those fortunes are often invested outside the country. This isn't just a case of ill-gotten gains from corruption being hidden in Swiss bank accounts to provide income in case a crooked politician has to flee a coup or a rebellion, though this is probably more common than it ought to be. There are also people with legitimate savings who see no future investing in a country where the returns are low, high-risk, or both. The result is capital flight.

Investment promotion ought to address capital flight as much as it seeks to attract FDI.

Tuesday, July 3, 2012

Development

The slogan of Growing Capacity, Inc. is "Invest for Development". "Development" here means more than economic development. It means the development of capacity of a society to provide opportunities for personal fulfilment. For this to happen, there has to be sufficient social capital to provide everyone with food, clothing, housing, education, healthcare, decent work and decent leisure. To devise policies to ensure this, we need to have an agreed and reliable way of measuring what the situation is now and how successful we are in improving it. That isn't as easy as it may sound.

Monday, July 2, 2012

Investment

I used to work at places with long names that were not easy to summarize when introducing myself. Say, for instance, I was meeting someone at a party or talking to a stranger at a bus stop. Unless they were working in the same line of business, it would be a bit of a mouthful for me to say,"I'm senior economist at the Vale Columbia Center on Sustainable International Investment under Columbia Law School and the Earth Institute at Columbia University" (up to last September) or "senior economist, principal administrator and head of global relations in the Investment Division of the OECD" (from 2002 to 2010). Even if they knew what Columbia University or the OECD was, probably the only word that would register would be "investment". So I might often just say,"I work on investment policies". The response would usually be something like "my cousin also works in an investment bank" or "so  you can tell me what to do with my pension, then?". And I would have to explain that I wasn't working on exactly that kind of investment.

So what sort of investing am I referring to in the slogan "Invest for Development"?

What this blog is for

Growing Capacity, Inc. is a consultancy founded by Ken Davies in March 2012 to promote investment for development. Its website www.growingcapacity.com explains its objectives and methods very briefly.

The aim of this blog is to expand on the ideas that you will find on the website and to provide a forum for discussion on issues related to investment for development.