FDI And Economic Development In Costa Rica: The Tico Tiger .
FDI and Economic Development inCosta Rica:The Tico Tiger that hasn’t .Carnegie Endowment for Peace, Heinrich Böll Foundation, GDAEWashington, D.C., June 19, 2008Eva A. Paus; Professor of Economics, Carol Hoffmann CollinsDirector, McCulloch Center for Global Initiatives, Mount HolyokeCollege, MA, USA
FDI and Development in Costa Rica:The Power of Path Dependencyand the Peril of Lack of StrategyPower Poised to attract FDI & derive benefits and Peril(a) Lack of a cohesive developmentstrategy(b) Lack of coherent pro-activegovernment policies to overcomemarket failures(c) low tax ratio
Costa Rica’s (and LA’s) Approach to Development:From ISI to Washington Consensus Trade liberalizationAverage tariff rate – 1985: 60 %, 2004: 6% Pursuit of FDICINDE & profit tax exemptions in EPZs Retrenchment of state as producer ®ulatorPrivatization & reduction of civil service
Costa Rica: Net FDI Inflows(millions of US 980198519901995200020052010
The Small Country with the Big Difference Majority of FDI in manufacturing Ability to attract FDI in high-tech sectors Most FDI in greenfield investment
Key Destinations for FDI in Costa RicaEfficiency-seeking FDI:(1)(2)(3)(4)(5)ElectronicsMedical devicesIT-based servicesClothing (past)Automotive equipment (future)Market-based FDI:(1) Tourism(2) Real estate
Why Costa Rica?The Country’s Location-Specific Assets(1) Strategic Location(2) The Fruits of Past Investments(a) high human capital(b) political stability(c) adequate infrastructure(d) strong institutions(3) The Fruits of Present Policies(a) English(b) CINDE & taxincentives in EPZs(c) Figueres’ strategicefforts to attract Intel
FDI and Development:Desired ResultsInvestmentEmploymentForeign exchangeTax revenueKnowledge-based assets
FDI and Development in Costa Rica:ResultsInvestmentEmploymentForeign exchangeTax revenueKnowledge-based assets
InvestmentAverage1970 - 1979Average1980 - 1989Average1990 - 2004Net FDIInflows/GDP2.31.83.1Net FDIInflows/GFCF10.18.816.1GFCF/GDP22.720.319.9Real GDPGrowth6.42.24.7
FDI and Development in Costa Rica:ResultsInvestment Employment Foreign exchangeTax revenueKnowledge-based assets
Employment in Zonas Francas19972005Higher wages16,57739,009
FDI and Development in Costa Rica:ResultsInvestment Employment Foreign exchange Tax revenueKnowledge-based assets
FDI and Development in Costa Rica:ResultsInvestment Employment Foreign exchange Tax revenueKnowledge-based assets
Problem I:Insufficient Tax Revenues(1) Trade tax revenue/total tax revenue1990: 40%2006: 8 %(2) Tax ratio2006: 13.9(3) Continued profit tax exemptions in EPZsuntil 2015
FDI and Development in Costa Rica:ResultsInvestment Employment Foreign exchange Tax revenueKnowledge-based assets
Problem II:Insufficient Advancement inKnowledge-Based Assets(1) Some training; collaboration withtechnical curricula(2) High-tech TNCs:into back-office services, NOT up thevalue chain.(3) Very limited backward linkages.
Costa Rica: FDI and Missing LinksTNC expenditureson national inputsTotal (Mill. of U.S. )Nationalexpenditures as a %of importsTotalMachinery, electricalmaterials & comp.Precision instruments& med.equipmentAgroindustryTextiles, clothing,leather & shoesSource: Based on 4.782.76.277.75.786.25.584.07.678.16.0
Why so few linkages?TNCs global production strategies- Global sourcing, contract manufacturers Insufficient national capabilities-Lack of informationLack of access to creditLack of technical capabilitiesInability to meet global standards (e.g. ISO,JIT)
How to Respond to Market Failures:Pro-active PoliciesNot well enough accepted for domestic linkage promotion:e.g. Ireland:1958: Irish Development Authority (IDA)1985: National Linkage Program1995: Enterprise Ireland (EI)e.g. Costa Rica:1982: CINDE2003: Costa Rica Provee
Making FDI Work for Development:Four LessonsLesson (I):FDI has to be partof a coherentdevelopment strategy.Focus: KBA
Making FDI Work for Development:Four LessonsLesson (II):Attracting FDI is not enough:pro-active policies are neededto develop spillovers.
Making FDI Work for Development:Four LessonsLesson (III):The need to increase fiscalresources: To advance human capital To improve infrastructure To support the private sector To achieve MDGs
Making FDI Work for Development:Four LessonsLesson (IV):The need to regulatetourism & real estateexpansion.Focus: SustainableDevelopment
Costa Rica: FDI and Missing Links TNC expenditures on national inputs 1997 1998 1999 2000 2001 2002 2003 2004 2005 Total (Mill. of U.S. ) 98.9 232.7 228 139.1 206.9 .
FDI and the Irish economy KEY FDI IMPACTS ON THE IRISH ECONOMY - 1,200 multinational companies - 150bn Exports (64% of Irish exports) - 200,000 Jobs in FDI, 340,000 in total - 70% of Corporation Tax - 8.7bn Spending on Irish services/materials - 10bn in Payroll - 67% of Business R&D expenditure US TAX CHANGES SHOULD NOT HIT FDI
Chinese FDI increased dramatically from US 90.6 billion to US 531.9 billion (Government of the People's Republic of China, 2013). In 2012, China's outward FDI accounted for 6.3 percent of global FDI and 2.3 percent of global stock of FDI, which put China third behind the United
Foreign direct investment (FDI) is an integral part of an open and effective international economic system and a major catalyst to development. Yet, the benefits of FDI do not accrue automatically and evenly across countries, sectors and local communities. National policies and the international investment architecture play an important part in attracting FDI to a larger number of developing .
Asiedu (2001) submits that the determinants of FDI in one region may not be the same for other regions. In that case, the major source of FDI in countries within a region may be different from one another with time variance. Hanson (2001) argues that the evidence that FDI generates positive spillovers for host countries is weak.
The Obama Administration has enthusiastically embraced inward FDI, bolstering the “SelectUSA” program at the Department of Commerce to strengthen America attractiveness for FDI and hosting the 2013 Investment Summit, where President Obama and multiple senior government and business leaders highlighted our new national priority on inward FDI.
Outline of the Presentation. 1.Nepali Legal System at a glance, 2.Major Laws and Policies Governing FDI, 3.Foreign Investment under the law of Nepal, 4.Entry and exit of FDI in Nepal, 5.Incorporation of Business Enterprises & Companies in Nepal, 6.Rights ,guarantee and security of FDI under
Why Trade and FDI Should Be Studied Together In Song Kim† Steven Liao‡ Sayumi Miyano§ March 23, 2022 Abstract Global value chains have knit trade and foreign direct investment (FDI) together as rms' engagement in one activity inextricably depends on the other. Yet, existing political economy
outward FDI, for example through the\Belt and Road Initiative"(Huang(2016)). In this context, a special role has been played by African countries. Although in terms of value (both ows and stocks) Africa still accounts for a relatively small share of total global Chinese outward FDI,1 these investments have recently attracted signi cant .
