WORKING PAPER 12-16

Transactions: A New Look at Services Sector Foreign Direct Investment in Asia

by Jacob Funk Kirkegaard, Peterson Institute for International Economics

October 2012

In this paper Kirkegaard presents new micro-level data consisting of individual greenfield investment projects and mergers and acquisitions as a source for detailed analysis of services sector cross-border investment flows among the Asian Development Bank (ADB) regional membership in Asia. The new transactional foreign direct investment (FDI) data are methodologically distinct from traditional BPM5-compliant FDI data but found to yield generally comparable aggregates, when compared with the latest available International Monetary Fund (IMF) data from the Comprehensive Direct Investment Survey for the ADB regional membership. The services sectors are found to receive considerably larger amounts of foreign investment, when compared with the Asian region's manufacturing and raw materials sectors. OECD countries account for roughly three-quarters of total recorded inward services sector FDI of about $2 trillion, relatively evenly split between the United States, the EU-27, and regional OECD-level-income countries. The presence of sizable regional "upward flowing" services sector investments into OECD-level-income economies is verified. Kirkegaard draws preliminary policy conclusions based on the new transactional FDI data results concerning prospects for regional services sector liberalization, threshold income levels for inward services sector FDI, upward-flowing regional services FDI, and preferred modes of services sector investments.

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RELATED LINKS

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Working Paper 08-7: Policy Liberalization and FDI Growth, 1982 to 2006 August 2008

Book: US National Security and Foreign Direct Investment May 2006

Op-ed: Avoiding Another Dubai February 28, 2006

Book: Does Foreign Direct Investment Promote Development? May 2005



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