Séminaire BRICs, Université Paul Valéry-Montpellier 3, 3 mars 2017 ...

Séminaire BRICs, Université Paul Valéry-Montpellier 3, 3 mars 2017



Outward foreign direct investment from New-Wave Emerging Countries:

A shift of newly emerging multinational companies

Wladimir Andreff [1]

(final draft)

On the brink of the global financial and economic crisis, and during its
first years, the focus has been on the BRICs fast growth and resilience to
the crisis. One promising dimension of the BRICs economic development and
successful muddling through the crisis has been stressed as being a
dramatic expansion of their outward foreign direct investment (OFDI) and of
BRIC-based multinational companies (MNCs) over the past fifteen years or
so. This latter dimension is increasingly topical in the international
economics and business literature (our own contribution in Andreff 2014,
2016a, 2016b). However, focusing on BRICs' OFDI and MNCs has somewhat left
unheeded the fact that some other emerging economies do behave much better
than average in the global economy and have become significant and fast-
growing direct investors abroad as well. They may be a new wave of emerging
economies catching up with the BRICs as regards their development momentum,
namely in the area of OFDI achieved by their home-based companies. Such is
the issue tackled in this paper.
A first task is to sample a group of emerging economies (excluding the
BRICS[2]) which rank among major OFDI home countries (Section 1). Due to
this criterion our sample differentiates from some well-known groupings of
emerging countries and takes on board thirteen so-called "New-Wave Emerging
Countries" (NWECs). In Section 2, a first (non-exhaustive so far) analysis
traces back the emergence of the first OFDI and MNCs from these thirteen
NWECs, then provides some insights into their strategies and finally tests
some specific determinants of their OFDI that is those factors pushing
companies based in the thirteen countries to invest abroad (push factors).
In this inception study, the analysis is not extended yet to those factors
that attract NWECs' OFDI in some set of host countries (attractiveness or
pull factors)[3].

1. Sampling New-Wave Emerging Countries from the standpoint of outward
foreign direct investment

As soon as an economist talks about emerging economies/countries a problem
arises with delineating the country sample he/she is referring to. As a
result, except for the BRICs (Brazil, Russia, India, China) and the BRICS
(BRICs plus South Africa), it is not clear which countries are actually
considered as emerging economies. It is even less so when one is talking
about newly emerging countries or "new candidates to the emerging country
group" (Nurdin & Djermoun, 2015), mentioning countries like, for example,
Algeria, Bangladesh, Jordan or Saudi Arabia. Of course, the same comment
applies when studying multinational companies (MNCs) based in emerging
economies and OFDI from these countries with for instance case studies of
firms from Ghana and Nigeria (Konara et al., 2015).
The paper presents a methodological attempt at defining a relevant sample
of emerging economies from the standpoint of studying their MNCs and OFDI;
relevant means that the sample should be homogenous enough from within and
heterogeneous when compared to other country samples such as developed
market economies, post-communist transition economies or rent-depending
countries. The idea is to build up a data base with all countries in the
world which significantly invest abroad and then to select out of it a
relevant sample of emerging economies through a double process: a/ clean
the data base from obviously non-emerging countries such as well-known
developed market economies, post-communist countries and so on, on the one
hand; b/ on the other hand, fix a set of criteria that can be used to
define emerging economies by contrasting them with other countries that
significantly invest abroad.

1.1. Some usual samples of emerging countries

For our purpose, first let us fix a threshold below which a country will
not be regarded as a significant foreign investor in terms of OFDI. Though
a little bit arbitrary, we retain the following criterion: a country is a
significant OFDI home country if its OFDI stock is higher or equal to $1
billion in 2014 according to UNCTAD data published in the 2015 World
Investment Report. With this threshold in mind, 91 countries in the world
are screened and put into our data base (Appendix 1)[4].
Among the most famous samples of emerging countries in the literature
(Brière, 2009), one finds the IMF-acknowledged emerging economies; they are
23 countries:
Argentina, Brazil, Chile, China, Dominican Republic, Ecuador, Egypt,
Hungary, India, Indonesia, Ivory Coast, Malaysia, Mexico, Morocco,
Pakistan, Peru, Philippines, Salvador, South Africa, South Korea, Thailand,
Uruguay, Venezuela, that is 4 BRICS, Russia excluded + 19 countries.
Though covered with the official seal of an international organisation,
this panel is not definitely relevant for a study of emerging economies'
OFDI since countries such as Dominican Republic, Ecuador, Ivory Coast, and
Salvador do not invest much abroad - less than a $1 billion OFDI stock in
2014 (thus they are not included in our data base).
The Boston Consulting Group is used to work with a more restricted sample
(The 2008 BCG New Global Challengers) of 11 countries:
Argentina, Brazil, Chile, China, Egypt, Hungary, India, Indonesia,
Malaysia, Mexico, Thailand, that is three of the BRICs and one post-
communist transition economy (Hungary) leaving 7 countries for a "new wave"
emerging category.
Standard & Poor's usually retains a sample of emerging economies that is 30
countries:
Argentina, Bolivia, Brazil, Chile, China, Egypt, Hungary, India, Indonesia,
Israel, Jordan, Malaysia, Mexico, Morocco, Nigeria, Oman, Pakistan, Peru,
Philippines, Poland, Russia, Slovenia, South Africa, South Korea, Sri
Lanka, Taiwan, Thailand, Turkey, Venezuela, Zimbabwe (5 BRICS + 25
countries). Again some of these countries are not significant investors
abroad (Bolivia, Jordan, Sri Lanka), some are BRICS, and some are post-
communist transition economies.
BNP Paribas has also its own sample of 29 emerging countries:
Argentina, Brazil, Bulgaria, Chile, China, Colombia, Croatia, Czech
Republic, Egypt, Hungary, India, Indonesia, Iran, Malaysia, Mexico,
Morocco, Pakistan, Peru, Philippines, Poland, Romania, Russia, Saudi
Arabia, South Africa, South Korea, Thailand, Tunisia, Turkey, Venezuela (5
BRICS + 24 countries).
Here again, one is still left with two countries, Romania and Tunisia,
which are not significant investors abroad and one is a post-communist
economy.
Which of these samples is the best representative of actually emerging
countries and, once subtracting the five BRICS, of a "new wave" of emerging
economies? It is very difficult to trade-off between such samples. The
choice is even more puzzling if one considers that the most promising
emerging economies are considered to be:
The CIVETS, Colombia, Indonesia, Vietnam, Egypt, Turkey, South Africa, as
to HSBC,
The CIPP, Colombia, Indonesia, Peru, Philippines, as to the French COFACE,
The TICKS, Taiwan, India, China, South Korea, as to Financial Times (28th
January, 2016).
If one wants to have an exhaustive view of potential emerging economies,
one way to proceed is to merge all the previous samples and then get 38
countries:
Argentina, Bolivia, Brazil, Bulgaria, Chile, China, Croatia, Dominican
Republic, Ecuador, Egypt, Hungary, India, Indonesia, Israel, Ivory Coast,
Jordan, Malaysia, Mexico, Morocco, Nigeria, Oman, Pakistan, Peru,
Philippines, Poland, Romania, Russia, Salvador, Slovenia, South Africa,
South Korea, Sri Lanka, Taiwan, Thailand, Turkey, Uruguay, Venezuela,
Zimbabwe.
Cleaning this large sample from the 5 BRICS and those countries that do not
significantly invest abroad - Bolivia, Jordan, Romania, Sri Lanka and
Tunisia - one is left with a rather huge "new wave" of 28 emerging
countries. It is likely to be too much.
Another way to proceed, instead of merging the samples, is to look for the
common hard core of emerging economies obtained in crossing (overlapping)
the samples. This has been done with the first four mentioned samples -
IMF, BCG, Standard & Poor's, BNP Paribas - in a study of emerging
countries' MNCs (Andreff & Balcet, 2013). The outcome is a 19 country
sample:
5 BRICS + Argentina, Chile, Czech Republic, Egypt, Hungary, Indonesia,
Malaysia, Mexico, Poland, Slovenia, South Korea, Taiwan, Thailand, Turkey.
The latter sample encompasses only significant foreign investors. Once
cleaned from the 5 BRICS, a new wave of emerging economies from the
standpoint of OFDI would take on board 14 countries. It is probably the
most appropriate sample among those we have listed so far. However its
accuracy can be questioned as regards the Czech Republic, Hungary, Poland
and Slovenia which are post-communist countries with their own economic
specificities. Another question is about South Korea and Taiwan: are they
still emerging or actually emerged (developed) countries? In a previous
study of OFDI from developing and former communist countries (Andreff,
2003) referring to the 1990s, South Korea and Taiwan had already reached
the fourth stage of Dunning's IDP model, that is the first stage for
developed countries. Moreover the accession of South Korea to OECD
membersh