The role of FDI in promoting cross border linkages in the Greater Mekong Subregion

ROLE OF FDI IN BUILDING CROSS BORDER LINKAGES IN GMS

Smriti SharmaUNESCAP

June 3 – August 23, 2013

THE GREATER MEKONG SUBREGION

• Cambodia• Lao PDR• Myanmar• Thailand• Viet Nam

GARMENTS & TEXTILE:A GVC APPROACH

GLOBAL VALUE CHAINThe value chain describes the full range of activities that firms and workers perform to bring a product from its conception to end use

and beyond.

R&D RAW MATERIAL

COMPONENT NETWORK

PRODUCTION NETWORK

EXPORT MARKETING

FOREIGN DIRECT INVESTMENT

• A long term investment by a non-resident entity • Exerts substantial management control • By either setting up a subsidiary company, acquiring

shares (usually 10% or more as specified by OECD) or through the formation of a joint venture or undergoing a merger.

(www.investopedia.com)

METHODOLOGY

• 2 databases World Investment Report, 2013 (UNCTAD) fDi Markets• Period under study (2003-12)• FDI– Mergers & Acquisitions (Purchase/sale of

existing equity) & Greenfield Investments (New investments)

FDI INFLOWS - ASEAN

FDI INFLOWS - GMS

SOURCE COUNTRIES OF GFDI IN GMS

ROLE OF INTRA-ASEAN GFDI

FDI INFLOW COMPARISON WITHIN GMS

GFDI IN GMS (MANUFACTURING VS. TEXTILES)

JOBS CREATED – 927,094

GFDI IN CAMBODIA(MANUFACTURING VS. TEXTILES)

JOBS CREATED – 17,701

GFDI IN LAO PDR(MANUFACTURING VS. TEXTILES)

JOBS CREATED – 13, 247

GFDI IN THAILAND(MANUFACTURING VS. TEXTILES)

JOBS CREATED – 302, 288

GFDI IN MYANMAR(MANUFACTURING VS. TEXTILES)

JOBS CREATED – 10, 338

OWNERSHIP STRUCTURE VIET NAM

GFDI IN VIET NAM(MANUFACTURING VS. TEXTILES)

JOBS CREATED – 583, 520

POLICY RECOMMENDATIONS

• Garment and Textiles – High employment generating sector

• FDI will add to the capital of the countries• Required for investment, new technology, research

and best practices• Supportive policies required – reduce regulation,

bureaucracy, improve absorptive capacity• Border Area Promotion – Complementary Factor

Endowment• Reduce Service Link Costs