Changing role for emerging economies

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: emerging and developing economy exports are in the nature of intra-developing economy trade. The most significant instances of that are to be found in Asia—with Japan and China also playing definitive roles in intra-regional trade, investment and monetary cooperation. (It is commonest to find Vietnam fielding FDI from China as well as Taiwan in those lines of skilled mass-manufacturing that require more screwdriving than R&D capabilities.)

Meanwhile, FDI hosts amongst the Bric and other emerging economies have been helping out OECD firms by installing back-stops to job losses in the home (donor) economies. That applies when jobs are saved at home because a firm can ride out depressed and stormy markets by reaping (domestically unattainable) efficiencies in overseas unit(s).

Those surpluses can then be ploughed back as profits and applied to the task of supporting less efficient units at home. The absence of emerging economy FDI possibilities would have meant many more job losses since, then, the firm would continue to be loss-making overall, and be forced either to petition for closure, or re-organise under Chapter 11 of the US Bankruptcy Code.

Besides, Bric and other emerging economies are also doing their bit by investing in buy-outs of submerging OECD firms. India itself has been supplying much of such FDI and foreign acquisitions jumped from almost nought to $10.7 billion by the first quarter ending of fiscal 2007-08. That sum—used to fund the takeover of 34 foreign companies—was two thirds of the total projected FDI outflow for that fiscal. Also, the total, $15 billion, sum of outflows was greater than the FDI inflows ($12 billion) for the year. That in fact represented a continuation of a rush by Indian corporates to invest abroad, starting 2000. Indian companies concluded 50 foreign deals (worth less than $1 billion, however) in 2000. But that went up to $23 billion by 2006—a sum far in excess of the total FDI entering India. Tata Group has been India’s biggest investor, with a presence in 55 countries (and 35% of revenue from external sources.) Developing economies in which it has invested include Bermuda and Singapore; OECD member-states include the US, Britain and South Korea.

FDI from other notable Indian companies include Videocon, Dr Reddy’s, Ranbaxy, ONGC, Suzlon Energy, Hindalco Industries, and United Spirits. Even less fortunate, backward economies—like many in Africa—are being boosted by the growth appetite of the