Mauritius among small island developing states attracting most capital spending
Transnational corporations (TNCs) from developing and transition economies focused their interest mainly in four SIDS – Papua New Guinea, Maldives, Mauritius and Jamaica – accounting for 89% of their announced capital spending over 2003-13. (Image: Jamaica Information Service)
The World Investment Report 2014 showed that foreign direct investment (FDI) flows to Mauritius are directed almost totally to the services sector, with soaring investments in activities such as finance, hotels and restaurants, construction and business in the period 2007–2012.
Looking at average FDI per year over two 5-year stretches from 2001-2006 and 2007-2012, the report noted that FDI inflows to the Mauritius service sector increased almost five-fold from USD 78 million in the first 5-year period to USD 363 million in the latter period, as total FDI increased from USD 87 million to USD 375 million.
In another positive development, transnational corporations (TNCs) from developing and transition economies focused their interest mainly in four small island developing states (SIDS) – Papua New Guinea, Maldives, Mauritius and Jamaica – which together represented the destinations of 89% of those TNCs’ total announced capital spending over 2003-13.
Moreover, Mauritius featured among the top 5 destinations with the highest values of greenfield-FDI projects announced over the period 2003-13, with USD 4.5 billion of investment declared across sectors.
It was outstripped only by Papua New Guinea at USD 16.34 billion, Trinidad and Tobago at USD 7.26 billion, Maldives at USD 5.76 billion and Timor-Leste at USD 5.12 billion.
Meanwhile, global FDI inflows rose by 9% to $1.45 trillion in 2013, with FDI inflows increasing in all major economic groupings − developed, developing, and transition economies, noted the report by the UN Conference on Trade and Development (UNCTAD).
FDI flows to developed countries increased by 9% to $566 billion, leaving them at 39% of global flows, while those to developing economies reached a new high of $778 billion, or 54% of the total.
Developing and transition economies consist of half of the top 20 countries ranked by FDI inflows, hence the balance $108 billion went to transition economies.
Transnational corporations (TNCs) from developing economies are increasingly acquiring foreign affiliates from developed countries located in their regions.
As for developing and transition economies, they together invested $553 billion world-wide, or 39% of global FDI outflows, compared with only 12% at the beginning of the 2000s.
However, putting an end to a two year recovery, FDI inflows to Small Island Developing States (SIDS) declined by 16% to $5.7 billion in 2013.
African SIDS – comprising Cape Verde, São Tomé and Príncipe, the Comoros, Mauritius and Seychelles – registered the highest decline of 41% to $499 million, followed by Latin American SIDS which declined by 14% to $4.3 billion.
SIDS in Asia and Oceania registered a slight, 3% decline, to be set at $853 million.
Although FDI flows to the SIDS are very small in relative terms, accounting for only 0.4% of global FDI flows over 2001–2013, they are very high compared with the size of the SIDS’ economies.
The relatively high inflows to the group are the result of fiscal advantages offered to foreign investors in a number of SIDS, and represent a limited number of very large investments in extractive industries.
Caribbean SIDS have traditionally attracted the bulk of FDI into SIDS, which accounted for 78% of flows over the period 2001–2013.
However, SIDS located in Africa and in Asia and Oceania experienced relatively stronger FDI growth during the 2000s decade.
Their share in total FDI flows increased from 11% in 2001–2004 to 20% in 2005–2008, to 29% in 2009–2013.
FDI inflows to Africa rose by 4% to $57 billion in 2013, driven by international and regional market-seeking and infrastructure investments.
With total FDI inflows of $426 billion in 2013, developing Asia accounted for nearly 30% of the global total and remained the world’s number one recipient region while FDI flows to Latin America and the Caribbean reached $292 billion in 2013.
The report reveals an encouraging trend: after a decline in 2012, global foreign direct investment flows rose by 9% in 2013, with growth expected to continue in the years to come.
This demonstrates the great potential of international investment, along with other financial resources, to help reach the goals of a post-2015 agenda for sustainable development.
Transnational corporations can support this effort by creating decent jobs, generating exports, promoting rights, respecting the environment, encouraging local content, paying fair taxes and transferring capital, technology and business contacts to spur development.