FOREIGN DIRECT INVESTMENTS AND INDUSTRIAL POLICY A COMPARISON OF RESULTS BETWEEN SLOVENIA AND...
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FOREIGN DIRECT INVESTMENTS AND INDUSTRIAL POLICY A COMPARISON OF RESULTS BETWEEN SLOVENIA AND HUNGARY Albert Puig GATE (Analysis Group in Economic Transition) Department of Economics and Business Universitat Oberta de Catalunya Research Project: Effects of Foreign Direct Investments in Economic Development, in the framework of the cooperation agreement between University of Veracruz (Mexico) and University of La Havana (Cuba) Contact: [email protected] -In all countries have improved the contribution of the high and medium-high technology sectors to the trade balance. -In all countries have increased the exports weight of medium-high tech and high tech industries in relation to total exports. -The two extreme cases are Hungary and Slovenia: 88% of Hungarian manufacturing exports are conducted by subsidiaries of multinational companies while Slovenia this share is only 36%; therefore, 64% of Slovenian manufacturing exports are carried out by domestic companies. Our role: GATE received the request to analyze the subject of the research project applied to Central European Countries (CEC-5) during its historical transition period (1993-2001). The aim was to get some policy considerations which could be useful for policy makers in developing economies, particularly of Cuba during its transition process. For other side, the academic result should be a collective book which each author furnish two chapters (currently in press). Objectives: -To analyze the structural change during the transition process in CEC-5 -Identify the contribution of FDI to structural change -Analyze the differences between CEC-5 -Connect these differences with their respective policies related to FDI -In the CEC-5, manufacturing shifted from low-technology industries towards more technology-intensive industries. -In four of them, the technological restructuring was largely derived from the presence of companies with foreign participation (FIEs). Stresses especially the Hungarian case. -At the other extreme, Slovenia is the only country where the structural change of the FIEs, in relative terms, has been negative. Therefore, the restructuring of Slovenian manufacturing seems proceed mainly from the restructuring of domestic firms Structural change in CEC-5 Introduction Industrial Policies related to FDI -In all the CEC-5, the productive and specialization transformation have generated a progressive decrease of traditional production sectors and the promotion of high and medium-high technology -In Slovenia, this dynamic was led by domestic firms while in the other four countries considered the main actors were the multinationals firms. -In Slovenia, FDI has acted as a instrument of domestic companies restructuring; in the others (with a liberal model), foreign investors have contributed to productive change but not to the local firms restructuring. -These different policies and dynamics generate a segmentation of the local productive systems in the CEC-4 while in Slovenia, whit lower levels of FDI, they have been more settled down in the local economy and, therefore, they are less volatile and relocated. -Slovenia has followed a "strategic" industrial policy related FDI -The rest of the CEC have followed a liberal policy towards FDI Evolution of export’s specialization OECD classification about manufacturing industries according to their technological intensities High-tech industries Aircraft and spacecraft Pharmaceuticals Office, accounting and computing machinery Radio, television and communication equipment Medical, precision and optical instruments Medium-high-tech industries Electrical machinery and apparatus Motor vehicles, trailers and semi-trailers Chemicals, excluding pharmaceuticals Railroad equipment and transport equipment Machinery and equipment Medium-low-tech industries Coke, refined petroleum products and nuclear fuel Rubber and plastic products Other non-metallic mineral products Building and repairing of ships and boats Basic metals Fabricated metal products, except machinery and equipment Low-tech industries Manufacturing and recycling Wood, pulp, paper, paper products, printing and publishing Food products, beverages and tobacco Textiles, textile products, leather and footwear Change in manufacturing added value by industrial branches according to their technological intensities (1993 – 2001) (in basic points) All firms FIEs CZR HU POL SLO SLK CZR HU POL SLO SLK High 1,1 11,8 1,7 0,7 -0,3 2,6 16,3 0,0 1,7 0,2 M-H 2,7 8,2 1,5 1,4 -1,2 3,1 11,6 3,1 -12,7 0,6 M-L -0,9 -5,1 -3,1 3,4 8,0 1,5 -11,5 11,2 6,8 14,5 Low -2,9 -14,9 -0,1 -5,4 -6,5 -7,3 -16,4 -14,4 4,2 -15,2 Ach 7,6 40,0 6,3 10,9 15,9 14,5 55,8 28,8 25,3 30,5 RCh 2,6 15,6 1,6 2,7 1,6 5,2 20,2 5,9 -4,5 5,4 Conclusions Contribution to manufacturing trade balance of high tech and medium-high tech industries (in %) Slovakia Slovenia Hungary Poland Czech Republic Year (1997) (1997) (1994) (1994) (1994) High technology Medium-high technology Total -5,3 -4,2 -9,5 0,4 1,0 1,4 -2,0 -4,4 -6,4 -5,3 -8,2 -13,5 -7,0 -2,7 -9,7 Year (2004) (2004) (2003) (2003) (2003) High technology Medium-high technology Total -2,5 1,3 -1,2 1,0 4,1 5,1 2,2 -0,2 2,0 -4,4 -2,9 -7,3 -3,0 2,3 -0,7 Exports weight of high tech and medium-high tech industries Slovakia Slovenia Hungary Poland Czech Republic 1994 2003 1994 2003 1994 2003 1994 2003 1994 2003 High tech M-H tech Total 3,7 26,2 29,9 5,9 40,2 46,1 9,3 34,8 44,1 11,8 37,7 49,5 12,2 29,6 41,8 32,1 40,5 72,6 4,1 22,3 26,4 6,6 35,7 42,3 4,8 36,0 40,8 14,7 44,7 59,4 Weight of foreign affiliates in exports (2003) Slovenia Hungary % of exports 36 88 Country FDI stock in milions of dollars (1990 – 2009) FDI stock in % of GDP (2009) Average of FDI annual flows in % of Gross Fixed Capital Formation (1990 – 2009) Slovakia Slovenia Hungary Poland Czech Rep. 50.258 15.237 248.681 182.799 115.899 57,1 31,4 194,3 42,5 60,9 18,02 6,53 53,70 14,67 17,56 CEC-5 612.874 77,26 22,09 Spain Mexico India Ireland Korea 670.550 309.523 163.959 193.302 110.770 45,9 35,4 12,9 85,1 13,3 11,29 12,86 3,44 26,86 2,33 Percentage of foreign firms in manufacturing (2001) Added Value Ocupation Sales Exports Slovakia Slovenia Hungary Poland Czech Republic Average 56,1 23,5 64,9 52,0 48,5 49,0 36,4 19,4 45,2 32,9 34,1 33,6 59,3 29,4 72,5 52,0 53,3 53,3 74,9 40,9 87,9 66,2 69,0 67,8
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Transcript of FOREIGN DIRECT INVESTMENTS AND INDUSTRIAL POLICY A COMPARISON OF RESULTS BETWEEN SLOVENIA AND...
FOREIGN DIRECT INVESTMENTS AND INDUSTRIAL POLICYA COMPARISON OF RESULTS BETWEEN SLOVENIA AND HUNGARY
Albert PuigGATE (Analysis Group in Economic Transition)
Department of Economics and BusinessUniversitat Oberta de Catalunya
Research Project: Effects of Foreign Direct Investments in Economic Development, in the framework of the cooperation agreement between University of Veracruz (Mexico) and University of La Havana (Cuba)
Contact: [email protected]
-In all countries have improved the contribution of the high and medium-high technology sectors to the trade balance.-In all countries have increased the exports weight of medium-high tech and high tech industries in relation to total exports.-The two extreme cases are Hungary and Slovenia: 88% of Hungarian manufacturing exports are conducted by subsidiaries of multinational companies while Slovenia this share is only36%; therefore, 64% of Slovenian manufacturing exports are carried out by domestic companies.
Our role: GATE received the request to analyze the subject of the research project applied to Central European Countries (CEC-5) during its historical transition period (1993-2001). The aim was to get some policy considerations which could be useful for policy makers in developing economies, particularly of Cuba during its transition process. For other side, the academic result should be a collective book which each author furnish two chapters (currently in press).
Objectives: -To analyze the structural change during the transition process in CEC-5-Identify the contribution of FDI to structural change-Analyze the differences between CEC-5-Connect these differences with their respective policies related to FDI
-In the CEC-5, manufacturing shifted from low-technology industries towards more technology-intensive industries.-In four of them, the technological restructuring was largely derived from the presence of companies with foreign participation (FIEs). Stresses especially the Hungarian case.-At the other extreme, Slovenia is the only country where the structural change of the FIEs, in relative terms, has been negative. Therefore, the restructuring of Slovenian
manufacturingseems proceed mainly from the restructuring of domestic firms
Structural change in CEC-5
Introduction
Industrial Policies related to FDI
-In all the CEC-5, the productive and specialization transformation have generated a progressive decrease of traditional production sectors and the promotion of high and medium-high technology-In Slovenia, this dynamic was led by domestic firms while in the other four countries considered the main actors were the multinationals firms.-In Slovenia, FDI has acted as a instrument of domestic companies restructuring; in the others (with a liberal model), foreign investors have contributed to productive change but not to the local firms restructuring.-These different policies and dynamics generate a segmentation of the local productive systems in the CEC-4 while in Slovenia, whit lower levels of FDI, they have been more settled down in the local economy and, therefore, they are less volatile and relocated.
-Slovenia has followed a "strategic" industrial policy related FDI-The rest of the CEC have followed a liberal policy towards FDI
Evolution of export’s specialization
OECD classification about manufacturing industries according to their technological intensities
High-tech industries
Aircraft and spacecraft
Pharmaceuticals
Office, accounting and computing machinery
Radio, television and communication equipment
Medical, precision and optical instruments
Medium-high-tech industries
Electrical machinery and apparatus
Motor vehicles, trailers and semi-trailers
Chemicals, excluding pharmaceuticals
Railroad equipment and transport equipment
Machinery and equipment
Medium-low-tech industries
Coke, refined petroleum products and nuclear fuel
Rubber and plastic products
Other non-metallic mineral products
Building and repairing of ships and boats
Basic metals
Fabricated metal products, except machinery and equipment
Low-tech industries
Manufacturing and recycling
Wood, pulp, paper, paper products, printing and publishing
Food products, beverages and tobacco
Textiles, textile products, leather and footwear
Change in manufacturing added value by industrial branches according to their technological intensities (1993 – 2001) (in basic points)
All firms FIEs
CZR HU POL SLO SLK CZR HU POL SLO SLK
High 1,1 11,8 1,7 0,7 -0,3 2,6 16,3 0,0 1,7 0,2
M-H 2,7 8,2 1,5 1,4 -1,2 3,1 11,6 3,1 -12,7 0,6
M-L -0,9 -5,1 -3,1 3,4 8,0 1,5 -11,5 11,2 6,8 14,5
Low -2,9 -14,9 -0,1 -5,4 -6,5 -7,3 -16,4 -14,4 4,2 -15,2
Ach 7,6 40,0 6,3 10,9 15,9 14,5 55,8 28,8 25,3 30,5
RCh 2,6 15,6 1,6 2,7 1,6 5,2 20,2 5,9 -4,5 5,4
Conclusions
Contribution to manufacturing trade balance of high tech and medium-high tech industries (in %)
Slovakia Slovenia Hungary Poland Czech Republic
Year (1997) (1997) (1994) (1994) (1994)
High technology
Medium-high technology
Total
-5,3
-4,2
-9,5
0,4
1,0
1,4
-2,0
-4,4
-6,4
-5,3
-8,2
-13,5
-7,0
-2,7
-9,7
Year (2004) (2004) (2003) (2003) (2003)
High technology
Medium-high technology
Total
-2,5
1,3
-1,2
1,0
4,1
5,1
2,2
-0,2
2,0
-4,4
-2,9
-7,3
-3,0
2,3
-0,7
Exports weight of high tech and medium-high tech industries
Slovakia Slovenia Hungary Poland Czech Republic
1994 2003 1994 2003 1994 2003 1994 2003 1994 2003
High tech
M-H tech
Total
3,7
26,2
29,9
5,9
40,2
46,1
9,3
34,8
44,1
11,8
37,7
49,5
12,2
29,6
41,8
32,1
40,5
72,6
4,1
22,3
26,4
6,6
35,7
42,3
4,8
36,0
40,8
14,7
44,7
59,4
Weight of foreign affiliates in exports (2003)
Slovenia Hungary
% of exports 36 88
Country FDI stock in milions of
dollars (1990 – 2009)
FDI stock in % of
GDP (2009)
Average of FDI annual flows in % of Gross
Fixed Capital Formation (1990 – 2009)
Slovakia
Slovenia
Hungary
Poland
Czech Rep.
50.258
15.237
248.681
182.799
115.899
57,1
31,4
194,3
42,5
60,9
18,02
6,53
53,70
14,67
17,56
CEC-5 612.874 77,26 22,09
Spain
Mexico
India
Ireland
Korea
670.550
309.523
163.959
193.302
110.770
45,9
35,4
12,9
85,1
13,3
11,29
12,86
3,44
26,86
2,33
Percentage of foreign firms in manufacturing (2001)
Added Value Ocupation Sales Exports
Slovakia
Slovenia
Hungary
Poland
Czech Republic
Average
56,1
23,5
64,9
52,0
48,5
49,0
36,4
19,4
45,2
32,9
34,1
33,6
59,3
29,4
72,5
52,0
53,3
53,3
74,9
40,9
87,9
66,2
69,0
67,8
