Sectoral Distribution of FDI

FDI flows in the primary sector have been declining fast. The share of FDI in the manufacturing sector has remained stable and it is the single most important sector in the developing countries. The share in services sector has been increasing in both developed and developing countries. The industry with the largest share of inward FDI in the world is finance followed by trade. The services like banks, insurance securities and other financial services, has remained top recipient of FDI over the past decade. The m3I in the services sector has been growing over the past years at a faster rate than the FDI in other sectors. 

Cross Border Mergers and Acquisitions 

Cross border mergers and acquisitions are another major trend in FDI, for the past several years, mergers and acquisition involving firms located in different countries have increased significantly. Cross-border mergers and acquisitions are primarily concentrated in developed countries, but there is also a trend towards an increase in such deals in some developing countries. The number and value of total cross-border mergers and acquisitions have increased significantly worldwide. The absolute value of all cross-border mergers and acquisitions sales and purchases amounted to 544 billion dollar in the year 1998. This witnessed 60% increase over the year 1997. Mergers and acquisitions represent a significant share of FDI flows, at least in the developed countries. In the year 1998, there were 89 mega cross border mergers and acquisitions deals. These mega deals accounted for nearly three- fifths of the total of all cross-border mergers. 

Recent cross-border mergers and acquisitions have been concentrated in industries that are losing comparative advantages. In the year 1998, the largest cross-border mergers was in the oil Industry followed by the automobile industry and the banking and telecommunication industry, The non-petroleum mining and refining industries also witnessed good mergers and acquisitions.

CROSS BORDER MERGERS AND ACQUISITIONS

The process of globalization of the economy has been strengthened at the global economy and firm’s level as the phenomenon of cross border mergers and acquisition. These affect the foreign direct investment flows, the World economy and competition.

Merger and acquisitions are a popular mode of investment for firms wishing to project, consolidate and advance their global competition position by selling off divisions that fall outside the scope of their core competence and acquiring strategic assets that enhance their competitions. For these firms, the ‘ownership’ assets acquired from another firm, such as technical competence, established brand names and existing supplier networks and distribution systems can be put to invertible use towards better serving global customers, enhancing projects, expanding market share and increasing corporate competitiveness by employing international production networks more efficiently.

For the past several years, cross border merger and acquisitions worldwide have increased significantly. The absolute value of all crosses border M & A sales and purchases amounted to $544 billion in the year 1998 representing an increase of about 60% over the year 1997. The amount was $342 billion in the year 1997. Cross-border M & A are primarily concentrated in developed countries, but there is also a trend towards an increase in such deals in some developing countries. In the year 1998, there were 89 mega cross-border M & A deals, each with more than $1 billion value. These mega deals accounted for nearly three-fifths of the total all cross-border M & A in the year 1998. Recent cross-border M & A have been concentrated in industries that are losing comparative advantages. In the year 1998, the industry that recorded the largest cross-border M &as include: oil industry, automobile industry, banking and telecommunication industry and non-petroleum mining and refining industries.