Indian economic service is undervalued

and developing countries - KOPS - University of Konstanz

DIPLOMA THESIS

universityConstancy

Faculty of

Administrative science

globalization and direct investment

in threshold andDeveloping countries

A political and economic analysis on the

Locational determinants of direct investments by German companies

presented by

Christian Olk

First reviewer: Prof. Dr. Gerald Schneider

Second reviewer: Dr. Thomas Gehring


TABLE OF CONTENTS

CHAPTER I.

INTRODUCTION

DIRECT INVESTMENT AT A TIME

GLOBAL ECONOMIC TRANSITION

1 Introduction ............................................... .................................................. ...........................

1.1 Embedding the topic in the globalization debate ........................................... ...........

1.2 Direct investment as an indicator of globalization .............................................. .................

1.3 The empirical object of investigation: The direct investments of the German

Emerging economy andDeveloping countries..........................................................

1.3.1 Distribution Pattern and most important recipient countries of German direct investments ......

1.3.2 Distribution by industry and Forms of engagement .........................................

1.3.3 Contract processing as an alternative form of productive engagement by Germans

Companies in emerging andDeveloping countries............................................................

1.3.4 Summary of the empirical data situation ........................................... .....................

CHAPTER II

THEORIES OF DIRECT INVESTMENT AND THE

INTERNATIONAL LOCATION CHOICE

2. Theoretical Grandwere the location decisions for direct investments ........

2.1 Relevant microtheories ............................................... .................................................. ...

2.1.1 The monopoly advantage hypothesis .......................................... .....................

2.1.2 The product life cycle theory ............................................. .........................................

2.1.3 The risk portfolio theory ............................................. ..................................................

2.2 The Eclectic Theory of Direct Investment ............................................ ...................

2.3 Theories of location competition between states ............................................ .....................

2.3.1 Moderate approaches to competition between countries ......................................... .......


2.3.2 Approaches to extreme institutional competition between locations ....... 2.3.3 Criticism of the concept of

Location competition of states ............................................... ................................................

2.4 The theory of "national competitive advantages" in international industries ...................

CHAPTER III

EMPIRICAL HYPOTHESES AND

OPERATIONALIZATION OF THE VARIABLES

3. Empirical hypotheses and Operationalization of the independent variables ........

3.1 The market development hypothesis ............................................... ....................................

3.1.1 Market size, market growth and Export relations ................................................. .

3.1.2 Creation of expanded markets through regional integration ......................................... ...

3.2 The rationalization or location competition - hypothesis ........................................

3.2.1 The wage cost hypothesis ............................................. ..................................................

3.2.2 Availability of qualified labor - hypothesis .......................................... ........

3.2.3 The State Regulatory Competition - Hypothesis .......................................... .........

3.2.3.1 Protectionism versus free trade - hypotheses .......................................... .............

3.2.3.2 The tax competition hypothesis ............................................. ...................................

3.2.3.3 Regulation of Foreign Direct Investment ........................................... .........

3.2.3.4 Bureaucratic, ecological and social regulation ................................................ ..

3.3 The political-economic stability hypothesis ............................................ ...................

3.4 Variables not taken into account .............................................. ...........................................

4. The dependent variable: German direct investment in emerging and

Developing countries in the period from 1990 to 1996 ............................................ .......

CHAPTER IV

REGRESSION ANALYSIS

5. Method, procedure and Selection of the countries examined ..............................

5.1 Bivariate regression results ............................................... .........................................

5.2 Multivariate regression results ............................................... ..................................


5.2.1 Regression results for all of the threshold and Developing countries.....

5.2.2 Regression results while keeping the market size constant .....................................

5.2.3 Regression results by region ............................................ ................................

5.2.3.1 Africa and the Middle East ............................................... .......................................

5.2.3.2 Asia .............................................. .................................................. .............................

5.2.3.3 Latin America and the Caribbean ................................................ .....................................

5.2.3.4 Medium and Eastern Europe ................................................. .................................................

5.2.4 Test of the models for heteroscedasticity .......................................... ..............................

CHAPTER V.

COUNTRY-SPECIFIC EVIDENCE

6. Exceptional countries or extreme cases ........................................... ......................

6.1 Brazil: Another FDI magnet in the nineties due toand

consistent liberalization policy ................................................ .................................

6.2 Singapore: attractiveness for export-oriented direct investment in the wake of the

supposed East Asian Miracle .............................................. ......................................

6.3 Hungary and the Czech Republic: geographically close,

inexpensive EU aspirants .............................................. .............................................

CHAPTER VI

SUMMARY OF RESULTS AND

CONCLUSIONS

Bibliography ................................................. .................................................. .......

Annex I ................................................ .................................................. ...........................

Annex II ................................................ .................................................. .........................


1

1 Introduction

CHAPTER I.

INTRODUCTION

DIRECT INVESTMENT AT A TIME

GLOBAL ECONOMIC TRANSITION

The specter of the creeping exodus of the German economy in emerging and

Developing countries in the course of "globalization" has been going on since the beginning of the nineties

the economic policy debates and determines the arguments at round tables

just like in parliament.

As this debate suggests, the global economy has seen one in recent years

Process of structural transformation. Technological innovations, increasing political

and economic cooperation between states, the collapse of the

state economic communist systems, as well as the widespread enforcement of the

neoliberal paradigms in economic policy have private sector actors in

opened up new international scope for action in the nineties and the grade

global economic integration increased considerably.

Multinational corporations are often seen as the driving force behind this process

economic "globalization", which through its activities the international

increasingly intensify economic integration.

In addition to a number of other company activities, foreign direct investment represents a

the forms of internationalization of companies are of growing importance.

Governments rand around the globe, in industrialized countries as well as in

Swell- andDeveloping countries, see in the influx of foreign

Direct investment in their country is an important resource for the future development of their country

Economies. The determinants of foreign direct investment have,

as already indicated, in the past under the keyword “global

Location competition “a series of public and academic debates sparked, too

to whom this work would like to make a contribution.


2

The overriding theme is the logic of action of multinational companies.

The determinants of the locations you have chosen in the are examined

Threshold group and Developing countries and the verbandenen potential

Effects on the regulatory scope of action of governments in a

changed world economy.

The empirical analysis is based on a very broad definition of

The term "threshold and Developing countries". This includes both the classic

Developing countries in Africa, the Middle East, Asia and Latin America as well as the

so-called emerging economies or Newly Industrializing Countries (NICs) of the two

the latter continents, as well as the transition countries of Central and Eastern Europe

and the successor republics of the Soviet Union.

The specific question that I would like to pursue in the following is essentially: Which

Rationality followed the direct investments of German companies in emerging and

Developing countries at the beginning of the nineties from a global perspective

considered?

Has the global economic structural change and the resulting expanded opportunities

New patterns of behavior for companies in direct investments by German companies in

Swell- andDeveloping countries spawned? Set this up yours

Investment decisions now based onand increased international competition in

strong measure of the level of government regulation, the tax burden and the

International comparison of labor costs, like this the more recent theoretical one

Globalization literature presumes or are such globalization scenarios unfounded

ongrand the predominantly market-opening character of direct investments in

this group of countries?

The argument that I will follow building on an empirical analysis of the

Direct investments by German companies in 98 emerging andDeveloping countries

will develop, says that the globalization of the German economy via

Direct investment in these countries at an aggregated level in the early 1990s

Years still so strongly influenced by the motives for securing exports and Market development

was dominated. This left motives of taking advantage of relatively low labor costs, as well

competitively lower taxes and Regulatory standards in the backgroundand kick what

large or economically relatively advanced countries have considerable regulatory requirements


3

Receives room for maneuver. However, if one sees the market potential of a country as

“Natural” location factor, this is what the foreign economic policy of a country exercises

wage level as measured by productivity and the amount of labor law and other

Regulations ceteris paribus definitely have an impact on the investment behavior of

Companies from. These are increasingly capable of state regulation

as the following analysis will show.

The study follows a double interest in knowledge. On the one hand, it should help

To bring more clarity into the economic policy debate in Germany, on the other hand

it follows a development policy interest.

Because from a development policy perspective, the question allows conclusions to be drawn as to

to what extent there is conflict or complementarity between the investment determinants

multinational corporations and an effective working and sociopolitical as well

fiscal regulation on the part of national governments, what this potentially in the

Could enable the effect of their policies on the influx of

To forecast direct investment capital, or important funding-relevant

Identify location factors.

This objective requires the selection of a research design that is capable of providing a

the largest possible number of threshold andDeveloping countries to cover and

favored the choice of a predominantly quantitative design based on a

statistical analysis. A design would have proven to be an alternative adapted to the problem

on the basis of interviews with decision-makers of direct investments in German

Company offered. 1 However, this procedure is for the subject of investigation

afflicted with serious methodological problems, such as the results

previous studies with this analysis technique show. 2 For the special case of

In particular, the present investigation would have posed the risk that companies would have

public relations reasons would have been inclined to dumping motives such as exploitation

of "cheap wages" and low labor and To deny social standards or

gloss over.

1 For examples of this approach, see Beyfuss (1990), Kayser (1981)

2 These problems include the availability of the relevant decision-makers (often the board members of the

Companies), the "refinement" of unsuccessful investment decisions, the omission or

Glossing over investment motives that are unpleasant for public relations reasons, such as exploitation

cheap labor, low social standards or ecological regulation. The

Mixing the determinants of different levels, resulting in the identification of an exact

Degree of importance of individual motifs prevented. For a detailed criticism of company surveys,


4

Therefore, in terms of the method, I will use the more reliable means of an econometric

Analysis, more precisely to a regression estimation according to the method of

Least Squares, or also known as OLS Regression Analysis 3

Following this statistical analysis, I will also look at some countries in more detail

whose inflow of German direct investment was well above the value of

ongrand the statistical estimate would have been expected, so-called outlier cases,

which are particularly interesting from a development policy perspective.

These countries are Brazil, Singapore, Hungary and the Czech

Republic.

Regarding the state of the empirical research on the object of investigation

no clear picture emerges. Most studies on the motives or determinants of

Direct investment in Developing countries are largely out of date and were done without

the inclusion of the extremely important medium-sized

and Eastern European countries. 4 Empirical studies the explicit variables on state

Include regulatory activity in the analysis carried out by the newer

Globalization literature that is emphasized as location determinants is missing

perfectly. In this respect, the approach chosen here represents a certain novelty.

The present work is divided into six chapters. In terms of approach, I will

in the continuation of this chapter an introduction to the empirical object of investigation

of the study, starting with a description of how the topic is embedded in the

public, popular science and academic globalization debate. It follows

a representation of the overriding global framework in which the concrete

The question moves. The aim will be to show how far the

The company's internationalization process has progressed to what extent

Swell- and Developing countries participate in this dynamic and to what extent foreign

Direct Investment (FDI) 5, which I will define in more detail below, is a reliable one

Represent "globalization indicator". Closes to this overarching global perspective

see Kallen (1987) p. 139

3 The abbreviation OLS stands for Ordinary Least Squares

4 see Kayser (1981), Schneider / Frey (1985), Kallen (1987), Beyfuss (1990),

Agarwal / Gubitz / Nunnenkamp (1991), Hiemenz / Nunnenkamp (1991)

5 Regarding the abbreviation for foreign direct investment, I chose the English abbreviation

FDI Foreign Direct Investment because this abbreviation is an international standard and

In the German-language literature, however, there is no generally recognized and used throughout

Abbreviation has emerged. The reader of this work will eventually become familiar with the flood of

used anglicisms. It should be noted that I have taken terms from the literature

always used in the English original when no adequate synonym was available or

a translation would have impaired the meaning.


5

a detailed description of the empirical object of investigation is appropriate. The

German direct investment in emerging andDeveloping countries in the first half of

At this point, the nineties are becoming more international than other forms

Production shown on the basis of descriptive statistics.

In Chapter II I will then discuss the most important theories on the determinants of

Direct investment and the international choice of location in the form of a literature review

represent. One focus in this part is on the so-called "systemic

Location competition debate ”, which essentially revolves around the question of the extent to which the

prosperity and the "competitiveness" of a state from its regulatory

Standards and its attractiveness to direct investment depends, or rather, whether

States as well as companies are in a competitive relationship due to the dynamic of globalization

be pushed with zero-sum game character? This debate is built on different ones

Sizeandassumptions about the determinants of direct investment.

Based on the Grandassumptions of the various theoretical explanations

I will then in Chapter III, taking into account the more empirically oriented

Research literature Formulate hypotheses on the determinants of direct investment

and operationalize them.

In Chapter IV, the hypotheses are checked using a statistical test

Analysis continued in Chapter V by examining the four most extreme of the

Estimates of the statistical models differing countries: Brazil, Singapore, Hungary the

Czech Republic is supplemented.

Finally, in Chapter VI, I will summarize the results of the study and

Draw conclusions on the globalization, and Location competition debate as well

the development policy implications of the analysis and its own theoretical

Hypothesis based on the concept of “surplus” or surplus FDI

formulate the empirical results.

1.1 Embedding the topic in the globalization debate

Since the beginning of the nineties, the buzzword of globalization has increased

Press the reports about the relocation of production by German companies in emerging

and Developing countries.

This phenomenon has not been limited to individual cases in the for a long time

Textile industry but has meanwhile most branches of the German economy up


6

down to medium-sized industry. 1 These are returned

Production relocations from the journalistic side mostly to the comparative

lower labor costs and Regulatory standards in these countries.

Along with rising unemployment in the Bandes republic produced this accumulation

of individual cases with many people the perception of a creeping

Company emigration. This perception sparked an ongoing economic policy

Debate, which among other things in German Bandestag from the point of view of

Attractiveness of the "location Germany" for his company was carried out.

Comparable economic policy discourses can be found in almost all others

Industrialized countries.

Popular science publications such as the one translated into several languages

Bestseller “The Globalization Trap - The Attack on Democracy and Prosperity “2, heated

the globalization discussion in the public continues.

The academic globalization discussion, on the other hand, has been centered around for a long time

Question whether a process of globalization as a phenomenon with a novel logic

exists or is nothing more than a myth constructed from exaggeration or

has at least not yet reached the extent that the term global in contrast to

would justify internationally. 3 A recent strand of this debate deals with the question of whether

multinational companies have completely lost their national roots and

as a result have become truly transnational actors who claim to be “homeless

Essence “to withdraw from regulation by national governments to an increasing extent

can. 4th

The topic of this article, the determinants of direct investment in emerging

andDeveloping countries play an important role in the globalization discussion because

Ultimately, both the employment policy effects of the

Foreign commitments of German companies as well as the regulatory scope of the

1 The spectrum of production relocations by German companies in emerging and Developing countries is enough

the global commitment of the large German multinationals in the manufacturing industry in the sectors

Automotive, chemistry, mechanical engineering and Electrical engineering, through the sewing of sporting goods through contractual partners

in Chinese prisons, accounting outsourcing and Programming work by

Airlines and Insurance companies in the Indian silicon valley Bangalore up to the brewing of

Beer according to the German purity law in Argentina and Vietnam, as you can see in the daily press.

This list of illustrative examples could be continued indefinitely.

2 see Martin / Schumann (1996)

3 For representatives of the globalization position see: Dunning (1997), (1997b) and others, Scharpf (1997), Beck (1997),

Habermas (1998), Frieden / Rogowski (1996), Gandlach / Nunnenkamp (1996), Hübner (1998), Hirsch (1995),

Nunnenkamp / Gandlach / Agarwal (1994), Sweeny (1993)

For representatives of a skeptical position see: Hirst / Thompson (1996), Graham (1996), Bairoch (1996),

Härtel / Jungnickel (1996), Pauly / Reich (1997)

4 Cf. Dunning (1997b), Hirst / Thompson (1996), Pauly / Reich (1997)


7

Governments in Germany and the recipient countries of German investment capital

significantly influenced by the motives or determinants of direct investment.

If the assumption of globalization or transnationalization of companies in

Contrary to the well-known phenomenon of internationalization, so should be correct

should see a strong trend away from direct investment motives

market-opening direct investments to cost-related outsourcing investments

to be determined. I will use this hypothesis in the following in the context of the empirical

Review analysis.

Before that, however, I would like to give the reader a more detailed introduction to the subject of investigation

and its theoretical sizeandgive locations.

1.2 Direct investment as an indicator of globalization

Even if the term has been the economic policy since the beginning of the nineties at the latest

Determines discourses, the exact meaning of the word globalization is seldom clear

defines, as the sociologist Ulrich Beck aptly emphasizes:

"Globalization is surely the most used - abused - and least defined,

probably the most misleading, most nebulous and politically most effective and Dispute-)

Word of the last, but also of the coming years. "(Beck 1997, p. 42)

There is no universal definition of globalization. Nonetheless, or

It is precisely because of this character that the term was included in the title of the present work

included in order to be able to show the empirical meaning with which the

Lets fill in term relating to foreign direct investment and which facts

can be subsumed under it.

John H. Dunning, arguably the best-known author in the field of multinational theory

Company specifies the term in relation to its area of ​​expertise as follows:

"The deepest form of globalization - and it is here we can most easily distinguish globalization from other

Forms of internationalization - is where an economic entity transacts with a large number of other economic

entities throughout the world; where these exchanges are highly coordinated to serve the world-wide interests

of the globalizing entity; and where they consist of a myriad of different kinds or forms of transaction. Thus a

typical global firm will own or control subsidiaries, and engage in value-added business alliances and networks

in each continent and in each mayor country. "(Dunning 1997b, p. 13)


8

This quote from Dunnings indicates that internationalization or globalization

the firms have a number of cross-border activities carried out by those

Foreign direct investment is only a part of it.

Nonetheless, in particular global direct investment flows alongside global ones

Financial transactions and international trade flows as empirical indicators for

this widely assumed, often postulated a priori phenomenon is used. Hence it is

It is necessary to define this globalization indicator more precisely

to be narrowed down: 5 Foreign direct investments are in contrast to portfolio investments

characterized by the acquisition of property and Control rights to abroad

bornanda capital and describe the assets in the balance sheet and Liabilities the one

certain domestic company in companies or holding companies outside

of his country of origin. Therefore, the aggregated direct investment data based on

The survey procedures of the national institutions usually differ from country to country

based 6 and exclusively the financial interdependencies between foreign ones

investor and Measure object of participation, a number of different empirical phenomena

These range from setting up a production facility abroad to expanding it

of sales and Service network of a company up to purely passive investments

foreign asset management companies. Include direct investment

Start-ups as well as takeovers and can take a number of other forms

entrepreneurial commitments such as joint ventures or strategic alliances

lock in.

The actual extent of entrepreneurship in a particular country

therefore cannot be fully estimated using direct investment data because the common

External financing via the foreign capital market is not recorded in any way. 7th

FDI flows abroad represent despite the intransparency of exactly through them

recorded empirical phenomena, an important indicator of the degree of globalization of the

Company.

In terms of their absolute size, however, foreign direct investment is lagging behind

other forms of globalization. International trade still poses

5 The exact accounting definition of direct investment as a dependent variable of this study, as it

for measuring German direct investments abroad by Deutsche Bandesbank is used in

Appendix II of this thesis is presented in detail. The short definition given here is intended exclusively for this purpose

serve to explain the general meaning of the term and to specify.

6 The differences in the different national survey procedures relate, among other things, to: the capture of

reinvested profits, intra-group credit relationships, holding companies, in third countries

loans taken out, the delimitation of direct and Portfolio investments and the valuation of

Stocks and Disinvestments; see Härtel / Jungnickel (1996) p. 49


in million DM

9

the main economic interdependence mechanism between states in the

World economy and the most important form of globalization of German companies. So

German direct investment flows from 1990 to 1995 amounted to only 5% of the

Exports of goods and Services in the same period. 8 However, they have

international direct investment flows have seen rapid expansion in recent years

Experienced and were able to record growth rates far higher than those worldwide

Export flows. 9 In terms of their geographical distribution, the global ones are concentrated

Direct investment to the industrialized countries, where in 1995 UNCTAD 73% of the stocks

were recorded. The proportion of threshold and Developing countries to the worldwide and

in particular in the German direct investment flows has also been declining since

Mid-early eighties. While in 1980 23.1% of all Germans

Direct investment stocks on emerging and Developing countries accounted for in 1996

just 11% less the transition countries. 10

The FDI growth rates in the non-OECD countries are far below those in the

industrialized countries as Figure No. 1 for the development of the world and

German direct investment stocks in the period from 1985 to 1996 shows:

Figure # 1: Change in global and German direct investment

German FDI holdings 1985-1996

500000

400000

300000

200000

100000

0

1985

1987

1989

stocks in OECD and Non-OECD Countries, 1985-1996

1991

1993

Source: Deutsche Bandesbank (1998) Source: UNCTAD (1998)

1995

Worldwide FDI stocks 1985-1996

7 see German B.andesbank (1997) p. 65

8 see German B.andesbank (1997) p. 65

9 see UNCTAD (1995), Graham (1996): Adjusted for inflation, Graham estimates the average annual

Growth for the period 1986-1990 as follows: world income: 6%, exports 9% and

Direct investment flows: 23%, see Graham (1996) p. 8; The German Bandesbank calculated for the time space

from 1984-1995 an average growth of 17.5% per year, see Deutsche Bandesbank (1997) p. 64

10 see German B.andesbank (1998) Hübner (1998) p. 268

in million $

4000000

3000000

2000000

1000000

0

1985 1990 1996

OECD

Non-OECD


10

Nevertheless, the German as well as the global direct investment stocks experienced in

Swell- andDeveloping countries strong growth from the beginning of the nineties,

what on, among other things, to the opening of the transition countries to direct investment and

attributable to the sharp rise in investment levels in the growth region of Asia

is. 11 This is what happened in the period under study of the present study from 1990 to 1996

more than a doubling of both global and German

FDI stocks in emerging andDeveloping countries.

There are no precise figures on the exact level of global direct investment stocks

Numbers ahead. UNCTAD's World Investment Report is based on an estimated amount

of $ 2.14 trillion, this figure being its historical value and Not the

Reflects the market value of the investments, which are significantly above the historical value

should be 12

The rapid rise in global direct investment since the end of World War II has

by the nineties to the emergence of an estimated 39,000 multinational

Companies, (including only 4148 from Developing countries) with approx. 270,000

Branch offices around the world, which, according to ILO estimates, are 70 million worldwide

Keep people busy. 13 Of the multinationals' foreign subsidiaries, fewer than

half in sleepers andDeveloping countries localized. 14th

As these data show, many once national companies have a high degree of

international presence built up locally, reflecting the national character of these companies

relativized. Globalization as opposed to internationalization can correspond to the

previous definition by John H. Dunning out of the question when one

the high degree of concentration of direct investment flows in the handful of OECD countries

and the geographical distribution of the subsidiaries of multinational companies

considered. 15th

A look at global direct investment flows also leads to the conclusion that

the threshold and Developing countries are still largely decoupled from this dynamic

are, in comparison with the OECD world, which means that the question of this study,

measured in terms of nominal sizes, only a marginal part of the

Can analyze the globalization process via direct investment.

11 see UNCTAD (1998) p. 16

12 see Graham (1996) p. 8

13 see Härtel / Jungnickel (1996) p. 48

14 see Dunning (1997b) p. 23

15 This argument is also supported by a number of other studies, see Härtel / Jungnickel (1996)

P. 17; Hirst / Thompson (1996) p. 78; Graham (1996) p. 25


11

Building on this global perspective, I would like to take a closer look at the specific

the empirical subject matter of the present study; the Germans

Direct investment in emerging andDeveloping countries in the first half of

nineties.

1.3 The empirical object of investigation: The direct investments of the German

Emerging economy andDeveloping countries

The German direct investment flows have increased rapidly since the mid-1980s

and achieved a great deal in parallel to the international trend in recent years

higher growth than the exports of German companies. 16 In the ranking of the world's largest

In 1995, German firms invested countries with net holdings of US $ 138 billion

fourth place behind firms from the USA (US $ 330 billion), Japan (US $ 262 billion) and

the historically strong international companies from Great Britain (150

Billion US- $). 17 In the approx. 19,000 companies with German equity participation over

Foreign direct investment attracted more than three million people in 1996

Employment, of which rand one million in threshold andDeveloping countrieswhat a

indicates the high importance of this group of countries in terms of employment policy. 18th

For the group of emerging economies, German direct investment capital and

Developing countries are often an important economic resource in the development process

that the bilateral German development aid in many countries even by far

exceeds. This is especially true for the emerging economies of Asia and Latin America. 19th

According to official figures, the stocks of direct investment by German companies abroad 20 amounted to the official figures

Statistics at the end of 1996 21 total to rand DM 446 billion. Of this, more was accounted for

16

From 1990 to 1995, direct investments by German companies abroad were average

Growth rate of approx. 10%, see Deutsche Bandesbank (1997) p. 64

17

see German B.andesbank (1997) p. 64

18

see German B.andesbank (1998)

19

In terms of their size, German direct investment flows in emerging and Developing countries too

At the beginning of the 1990s, however, it lagged behind German bilateral development aid. this applies

especially for the group of developing countries with low and middle income where the

German bilateral Official Aid (OA) from 1992-95, at DM 29.3 billion, was more than twice as high as that

Direct investment flows into this group of countries in the same period (14 billion) .; see B.andMinistry of

economic Cooperation and Development (1997) p. 60 ff

20

immediate and (existing via dependent holding companies abroad) indirect German

Direct investments abroad (consolidated) according to the stock statistics of the Germans Bandesbank

21

1996 is the last reporting year to the inventory data of the at the time this work was carried out

Germans B.andesbank templates. For the years 1997-1999 only flow data was on a very high

Limited country base for the group of emerging and Developing countries before that as well

Bring serious interpretation problems with them.


12

than 85% on industrialized countries and including just over 52% on the EU

Member States. On the threshold and Developing countries, including the

Transition countries accounted for only around 15% of German direct investment, which is why the

Transformation countries, including the People's Republic of China, have a share of approx. 4%

exhibited. 22 This shows that the process of Europeanization for the German economy of

is far more important than the supposed globalization process. Even if the

German direct investment in emerging andDeveloping countries in

Investigation period more than doubled, so their share went to the

Total direct investment, however, declined and the growth rates were far below those in

the industrialized countries and just as far below the average global growth of the

FDI stocks outside the OECD world, as shown in Figure 1

emerged.

Measured on in the Bandes republic generated gross domestic product make the

total German direct investment abroad is only approx. 1% of German

Economic performance from what its potential impact on the German

Certainly let the economy turn out to be lower in real terms than the sometimes heated debates

create the impression about the "location Germany".

The meaning and real level of direct investment in emerging and

Developing countries however, the official statistics of the Germans Bandesbank

ongrand the calculation method and the exchange rate development of the DM against a

systematically underestimated a large number of developing countries and in real terms should be far

be more significant, such as the number of andDeveloping countries captured

Companies and the quotient of the number of companies and Show direct investment level. 23

22 see German B.andesbank (1998)

23 I got the information about checking these quotients in a telephone conversation with the

RWI world economic expert, Roland Döhrn, to whom I am indebted for this.


13

1.3.1 Distribution Pattern and most important recipient countries of German direct investments

in threshold andDeveloping countries

Figure No. 2: Geographical distribution of German direct investment stocks

Companies in emerging andDeveloping countries, 1996

countries of the world

Inventories in million DM

2,763 to 13,739 (7)

1,082 to 2,763 (6)

725 to 1,082 (6)

204 to 725 (6)

110 to 204 (7)

78 to 110 (7)

62 to 78 (5)

34 to 62 (8)

12 to 34 (7)

2 to 12 (7)

As Figure 2 shows, German direct investment stocks are concentrated in

Swell- andDeveloping countries on a few states. Only ten countries absorbed 77%

of all direct investment stocks. Regionally, the largest share was accounted for in 1996 with 26.8

DM billion still in Latin America and the Caribbean what a share of rand 65% on

direct investment in Developing countries corresponds to. 24

Within the continent, stocks are concentrated in the emerging economies of Brazil

(DM 13.74 billion), Mexico (DM 3.88 billion) and Argentina (DM 2.54 billion). Are significant

also direct investments in the offshore financial centers in the Caribbean,

led by the tax oasis Cayman Islands (2.86 billion), which I will, however, in the following