Sectoral Performance through Inflows of Foreign Direct Investment

As per the reports of the UNCTAD or United Nations Conference on Trade and Development, it is pretty clear that the sectoral performance of the inflows of foreign direct investment is not always as good as it is expected to be.

For example, in 1999 the foreign direct investment in India went down to 2.2 billion dollars compared to 2.6 billion dollars in 1998.

This should not have been the case as the economic liberalizations had been effected and a better performance was being expected on the foreign direct investment front. This is all the more surprising in the context of the fact that the foreign direct investment made in India had gone up from 2.4 billion dollars in 1996 to 3.6 billion dollars in 1997.

During the same period in 1998, the total foreign direct investment made in the world has experienced a major rise. The amount had gone up to 644 billion dollars and this was an increase of 40%. In 1999 the total foreign direct investment of the world reached 865 billion dollars.

It was an increase of 27%. The foreign direct investment in the health sector has picked up in the recent years. This has been, to a large extent, owing to the General Agreement on Trade in Services, which has sought to liberalize the trading of services.

This agreement recognizes the foreign direct investment to be an important part of the trade agreements. However, there are some important areas in this case that need to be looked at and considered carefully. The various details of the agreement like the commodities and type of negotiation are extremely important in this case and the performance of the foreign direct investment would depend highly on these factors.

There has been a huge amount of foreign direct investment in the power markets around the world. This is applicable for the economically developing as well as developed countries. As far as the economically developing countries are concerned the Chinese power sector has been one of the major names.

During 2002 the Chinese power sector received 52.7 billion dollars in foreign direct investment. The United States of America is one of the leading names when it comes to receiving foreign direct investment in the economically developed countries is concerned. However, it is expected that in the near future China would leave the USA behind in terms of receiving foreign direct investment in the power sector.

The sectoral performance of the foreign direct investment in case of the service sector has been comparatively limited in the economically developing countries. This is all the more applicable for the countries in the South-East Asian region like Sri Lanka, Bangladesh, India, Nepal, and Pakistan.

All of these countries, with the exception of Nepal, have liberalized certain sections of their service sectors for the foreign direct investors. This has also reflected in the sectoral performance statistics of the foreign direct investors in the country. Overall, in 2005 the South-East Asian countries have received 30 billion dollars in foreign direct investment and the investments have mostly been in the financial, telecommunications, construction and transportation service sectors.