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Creating funds oil exporter countries10/3/2023 ![]() ![]() There are large discrepancies between the different sources that are hard to explain as it is difficult to access the complete methodology used by each country. It is important to note that assembling a reliable database on FDI in Africa is challenging, particularly for FDI from China. Some countries do not specify a threshold point, but rely entirely on other evidence, including companies´ own assessments as to whether the investing company has an effective voice in the foreign firm in which it has an equity stake. For example, in the United Kingdom, a stake of 20 per cent or more was a threshold until 1997. As these definitions emphasize, the notion of control is quite subjective and the minimum of 10 per cent ownership is a suggestion of how to qualify the ability of the investor to have an influence on the management of the enterprise rather than a strict requirement. The most important characteristic of FDI, which distinguishes it from foreign portfolio investment, is that it is undertaken with the intention of exercising control over an enterprise” (Detailed Benchmark Definition of Foreign Direct Investment: Third Edition).įDI is a central indicator in economy, yet difficult to measure precisely. An effective voice in management only implies that direct investors are able to influence the management of an enterprise and does not imply that they have absolute control. The OECD gives a similar definition :“a direct investment enterprise is an incorporated or unincorporated enterprise in which a single foreign investor either owns 10 per cent or more of the ordinary shares or voting power of an enterprise (unless it can be proven that the 10 per cent ownership does not allow the investor an effective voice in the management) or owns less than 10 per cent of the ordinary shares or voting power of an enterprise, yet still maintains an effective voice in management. Some degree of equity ownership is almost always considered to be associated with an effective voice in the management of an enterprise the BPM5 suggests a threshold of 10 per cent of equity ownership to qualify an investor as a foreign direct investor”. The unincorporated or incorporated enterprise a branch or subsidiary, respectively, in which direct investment is made - is referred to as a "direct investment enterprise". The foreign entity or group of associated entities that makes the investment is termed the "direct investor". Further, in cases of FDI, the investor´s purpose is to gain an effective voice in the management of the enterprise. According tothe Balance of Payments Manual Fifth Edition (IMF), FDI refers to “an investment made to acquire lasting interest in enterprises operating outside of the economy of the investor. The most widely used definitions for Foreign Direct Investment are those of the International Monetary Fund (IMF) and the Organisation for Economic Co-operation and Development(OECD). ![]() Preamble - C aveats when dealing with FDI data But what are the characteristics of Chinese investment in Africa? And is the Chinese investment really different from other foreign investment in Africa? Since the beginning of the decade, when Beijing started promoting its “going out” policy and with the creation of the Forum for China-Africa Cooperation, firms from the Chinese mainland joined them which increased significantly Chinese investment. China began to invest in African countries in the 1980s, principally with firms coming from Taiwan and Hong Kong. However, China’s interest in Africa is not new. Among them, China’s increasing interest with Africa has generated considerable debates among scholars and journalists both in developed and developing countries. The continent has attracted new investments and projects and developed growing economic ties with emerging partners. China uses hybrid forms of financing tools, thus blurring the classical distinction between aid and FDI.ĭuring the last decade, Africa has experienced tremendous economic transformation. However, FDI is just one aspect of China’s “going out” strategy. Furthermore, Chinese enterprises have helped the establishment of an upstream-downstream-integrated industry chain in many African countries, thus transforming resource advantages into economic growth opportunities. The lion’s share of Chinese FDI in Africa goes to the natural resource sector, but there is more and more diversification in the recent years (in manufacturing, finance…). China began to invest in African countries in the 80s, however, since the year 2000, China's investment in Africa has been growing more rapidly. Part 1: CHINESE INVESTMENT IN AFRICA: WHAT CHARACTERISTICS? Is the union of the chinese dragon with the african lion nothing but a chimera? ![]()
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