Investment, Transfer Of Technology And Global Business

Trans-national investment in its forms, portfolio and Foreign Direct Investment (FDI), has become a striking feature of globalization. Net external worldwide financing has gone up from less than $10 billion in the early 1970`s to a high of $243 billion in 1996. It receded in 2001 from these historical heights, but reached an estimated $148 in 2003 and a forecast of $149 billion in 2004.14 Portfolio investment, foreign direct investment, and external borrowing, all exhibit the same trend. These impressive figures mask to a certain extent the scale of the growth of gross inflows in the net receiving countries because the data are in aggregate net terms. Despite that, the figures remain quite impressive. In some developing countries such as China, Tran‘s border investments, largely emanating from overseas Chinese investors, have accounted for 10 to 12 percent of fixed capital formation. The competition for foreign investment is keen enough that countries resort to competitive concessions and more and more uniformity in macroeconomic policies to attract the investors. The potential benefits of foreign investment as a supplement to domestic savings, as a source of technology transfer in the case of FDI and as a more efficient use of savings world wide, are undeniable. But, such investments raise questions for the global system. In the case of portfolio investment, the Asian crisis has graphically shown how the wave can turn around, and cause panic flights of capital engendering balance of payments difficulties and currency crisis in the host countries. Quite naturally, the incidence of R&D favours the rich countries with their established capacity to develop and apply new technology and to use qualified cadres of educated people from all over the world. Since all of the new technology is essentially in private business hands, the TRIPS confirm the exclusion principle of the market place internationally. Finally, the WTO system opens up the possibility of enmeshing the trade system into the investment and other subsystems in the application of trade law. Developing countries have long signaled their opposition to applying trade sanctions in disputes involving non- trade issues.