Gt

1. Emerging Multinationals in the Global
Economy: Trends and Issues
Emerging multinationals meeting
Paris  27 March 2006  OECD
Andrea Goldstein (OECD-DEV) &
Anne Miroux (UNCTAD-DITE)

2. 1. Definitions matter
• Emerging MNCs are those from
emerging economies ≠ from
– Third World (passé)
– Southern (what about Russia etc.)
– Born globals, pocket MNCs

3. Nationality: definitions and principles
• Existing criteria to define nationality:
– The principle of control
– The principle of incorporation (UK, US)
– The principle of the company HQ (FR,
DE)

4. Nationality: reality
1. companies controlled by non-resident entrepreneurs?
Lakshmi Mittal and Simon Patiño
2. companies that move their primary listing to an
advanced country’s financial market and yet maintain a
strong association with their countries of origin?
3. companies incorporated in developing countries that are
in turn subsidiaries of OECD MNCs?
4. companies from developing countries that are owned by
financial investors based in OECD countries?
5. companies established in offshore financial centres?

5. 2. OFDI data
• General problem with the quality of FDI data.
• even more serious with OFDI from emerging
economies.
1. definition issues
2. deficient data collection
• Flows vs. stock approach
• The round-tripping issue
– Hong Kong ( 40 % of the total OFDI stock of
developing countries)
– Russia
• data need to be interpreted carefully

6. Additional problems
• differences in the way data are collected, defined
and reported help to explain some of the oddities
in global data compilations
• while inward and outward FDI should in principle
balance, they rarely do. In 2004, global FDI
outflows stood at $730 billion, whereas the
inflows were $648 billion
• Bilateral comparisons  outflows reported by the
investing economies seldom resemble the data
provided by the recipient country

7. Nevertheless …
• clear upward trend
– OFDI stock from emerging economies multiplied by 11 since
1985
– year-on-year variance
– South-South FDI flows rose from an estimated $14 billion in
1995 to $47 billion in 2003 and have to an important extent
compensated developing countries for the decline in FDI
flows from high-income countries from $130 billion in 1999
to $82 billion in 2003 (GDF 2006)
• still a minor share of global FDI stock
– 11% in 2004
– 7% in 1990

8. Direction/geography
• Developing Asia dominates the scene
• New source areas, such as Russia and Gulf
countries
• At the country level, South Africa is also
important (more than India, close to mainland
China)
• South-South investment accounts for an increasing
share of IFDI in the South
• Most developing countries are regional in their
OFDI patterns (with the exception of Africa, because of South Africa)

9. 3. The importance of activities data
• FDI data relate to capital flows as reported in the balance
of payments.
• In order to assess the actual impact of the investments by
TNCs, it is important to look at so-called activities data.
– production (sales, value-added)
– Labour (employment, wages)
– trade (exports, imports)
– innovation activities (R&D) and
– taxes.
• Unfortunately, even fewer countries provide this kind of
data.

10. Enterprise data : to complement FDI data
Early 1990s Early 2000s
Total # of TNCs 37530 % Total # of TNCs 69727 %
Developed 9.14 Developed (excluding new
EU members)
70.7
Developing 7.6 Developing 25.8
Latin America 1.6 Latin America 4.2
Asia 5.8 Asia & Oceania 21.2
China 1.00 China 2.8
HK 1.33 HK 1.9
India 0.05 Korea 10.7
Korea 2.8 India 3.4
Taiwan 0.9
Transition economies 3.0
Parent corporations by regions/countries
Source: WIR 1994, table I.1 (p.4)
Source: WIR 2005, table

11. The internationalization of the largest TNCs from
developing countries is catching
0
10
20
30
40
50
60
70
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
Top 100 Top 50
Source: UNCTAD/Erasmus University database.
* TNI : transnationality index
Average TNI of the 100 largest TNCs in the world and the 50
largest TNCs from developing countries, 1993-2003.

12. 4. Industry composition
• Investment by developing country firms span all sectors
• Availability and quality of data constrain industry analysis.
• Services dominate
• OFDI stock of developing countries
– within manufacturing a number of industries are of relatively equal
importance
– Electrical and electronic equipment is No 1 in the manufactruing sector
• UNCTAD list of the 50 largest (non-financial) TNCs from
developing countries
– 8 are in electrical and electronic equipement
– 5 in petroleum exploration, refining and distribution
– 4 in food
– 3 each in telecommunications, transport and computer and related
activities

13. 1990 % 2003 %
Sector/industry
Developing
economies
Developing
economies
Primary 867 4. 7 3 178 . 5
Mining, quarrying and petroleum 582 3. 2 2 481
Manufacturing 6 109 33. 3 103 414 15. 5
Food, beverages and tobacco 420 2. 3 2 060 . 3
Textiles, clothing and leather 187 1. 2 712 . 4
Chemicals and chemical products 762 4. 2 4 351 . 7
Metal and metal products 85 . 5 2 618 . 4
Electrical and electronic equipment 1 018 5. 6 15 854 2. 4
Motor vehicles and other transport equipment 10 . 1 1 512 . 2
Unspecified secondary 3 231 17. 6 69 742 10. 4
Services 11 350 61. 9 562 409 84. 1
Trade 1 836 10. 65 342 9. 8
Transport, storage and communications 501 2. 7 41 093 6. 1
Finance 7 027 38. 3 153 304 22. 9
Business activities 1 283 7. 271 469 40. 6
Other services 526 2. 9 13 258 2.
Unspecified tertiary - ? 2 421 . 4
Unspecified 240 1. 3 51 870 7. 8
TOTAL 18 326 100. 669 001 100.
Source: UNCTAD.
Developing economies - Estimated world outward FDI stock, 1990 & 2003
(Millions of dollars and percentage)

14. Share of Investment by Developed
Investors by Sector
0%
25%
50%
75%
100%
1998 1999 2000 2001 2002 2003
Energy
Telecom
Transport
Water
Source: Public Private Infrastructure Advisory Facility (2005), Developing Country Investors and Operators in Infrastructure.

15. The Rise of South-South and
Regional Investors in Telecoms I
• South-South FDI
– From 2001 to 2003, over 36% of total inflows and close to 20% of
the total number of telecommunications projects
– in 1990–9, 23% of total inflows and 11% of the total number of
telecommunications projects
• Players in the 2002 top-30 list of telecoms MNCs
– Datatec (South Africa)
– América Móvil (Mexico)
– MTN Group (South Africa)
– Telekom Malaysia
• OECD MNCs investing through regional affiliates
– Vodacom of South Africa
– Sonatel of Senegal

16. Intraregional South-South Telecommunications FDI, 1990–2003
Destination region
Region of investor East Africa &
Pacific
Europe &
Central Asia
Latin America &
Caribbean
Middle East &
North Africa
South Asia Sub-Saharan
Africa
North-to-South 72 93 90 52 75 51
South-to-South 28 7 10 48 25 49
East Africa & Pacific 100
Europe & Central Asia 100
Latin America & Caribbean 100
Middle East & North Africa 100 36 5
South Asia 40
Sub-Saharan Africa 45
Note: Based on the largest 75 investors, accounting for 95% of total telecom-related FDI in developing countries.
Source: Guislain, Pierre and Christine Zhen-Wei Qiang (2006), “Foreign Direct Investment in Telecommunications
in Developing Countries”, in Information and Communications for Development 2006: Global Trends and Policies,
The World Bank.

17. The Rise of South-South and
Regional Investors in Telecoms II
• Characteristics
– operators from large developing countries investing within their
own regions.
– from countries that reformed early: privatization and competition
forced them to become more efficient.
– their exposure to competition was limited as they were generally
protected from full market liberalization
• Movers:
– withdrawal of some developed-country investors (but also Telekom
Malaysia from SSA)
– increasing wealth and capital account liberalization in some
emerging market economies

18. New, smaller players
• SingTel (in Bangladesh, Indonesia, the Philippines, and
Thailand)
• Shinawatra from Thailand (in Cambodia and the Lao
People’s Democratic Republic)
• MTC/Celtel (in Burkina Faso, Chad, DRC, Congo, Gabon,
Kenya, Malawi, Niger, Sierra Leone, Sudan, Tanzania,
Uganda, and Zambia.
• Orascom (in Algeria, Bangladesh, Iraq, Pakistan, and
Tunisia)
• Isbank (Turkey) and Banco Opportunity, Banco Safra, and
Techold (all from Brazil) are financial investors.

19. Major energy deals since 2004
Target (location) Buyer Date Price1
Oil
Spinnaker (US) Norsk September 2005 29.1
EnCana (US) Statoil April 2005 17.6
Kerr-McGee (UK) Maersk August 2005 15.7
Paladin (UK) Talisman November 2005 12.4
Al Furat (Syria) CNPC & ONCG December 2005 12/13
Pogo (Thailand) PTTEP-Mitsui June 2005 9.2
Vintage (Argentina) Occidental October 2005 8.4
Nelson (Kazakhstan) Lukoil September 2005 7.9
PetroKazakhstan CNPC August 2005 7.3
Unocal (global) Chevron August 2005 5.8
EnCana (Ecuador) CNPC September 2005 5.2
OML 130 (Nigeria) CNOOC January 2006 4.6
Gas
Caledonia (UK) E.ON September 2005 10.6
Teikoku Inpex October 2005 8.9
Columbia (US) Chesapeake Energy October 2005 5.1
Northwest (Australia) CNOOC December 2004 1.98
Tangguh (Indonesia) CNOOC May 2004 0.98
Source: Goldstein, Andrea (2006), Emerging Multinationals in the Global Economy.

20. 5. Motives
• The traditional OLI framework is useful, but needs
to be amended (the role of the “asset augmenting” objective)
• Defensive OFDI
– Jump over tariffs and NTBs
– Prevent accusation of job destruction (Indian BPO)
– Counter eroding domestic margins (China electronics)
– Reduce political risk at home (Russia)

21. South-South South-North
Horizontal Vertical Horizontal Vertical
Resource-seeking Hon Hai Amica
Wronki 
Gram
PDVSA –
Citgo
Efficiency-seeking BOE
Technology
 Hynix
Tata Steel SingPower
Market-seeking LAN
TVS
E-
valueserve
San Miguel AS Watson

22. 6. EMNCs are homogeneous
• Many are SOEs or government-linked companies
(Temasek in Singapore, … in Malaysia)
• Many are family-owned, affiliated to diversified
conglomerates (Tata, Santo Domingo, Koç, CP
Group, Anglo-American)
• Some are “pure players” (Arcor, Sabó)
• Some are born-global (Acer)
• Few are SMEs

23. 7. The impact of South-South FDI -- how
much it differs from North-South FDI?
• potential benefits of greater South–South integration are
supported by anecdotes, a few empirical studies, and
deduction and inference from the history of North–South
capital flows
• systematic research is difficult as data is lacking –
including about the characteristics of EMNCs
– Is South-South FDI targeted towards low-income countries
particularly where North-South FDI is limited.
– extent of spillovers from South–South FDI
– Do MNCs adhere to international norms on the transparency of
their foreign operations, as well as the environmental and labor
standards observed in those operations

24. 8. What consequences for OECD countries?
• More competition in developing countries (e.g.,
resources in Africa) : Southern FDI as an
alternative to MNCs from the North ?
• A subtle game: OECD MNCs maintain complex
and multi-level relations (e.g. Chevron-CNOOC,
competing for Unocal, cooperating elsewhere)
• FDI promotion: pro-active policies to attract FDI
from emerging economies
• As in the case of developing countries, issues
related to impact have to be considered.

25. 9. What consequences for
multilateral economic relations?
• The protectionist temptation
• Engage in dialogue (e.g., OECD Guidelines
and Anti-Bribery Convention; other CSR
issues)
• Broader consensus to include new issues in
the agenda? e.g., what is the value for a
Chinese firm to buy a Western brand if
counterfeiting remains rife?