The Organisation for Economic Co-Operation and Development

1) Is the capital generated in the industrialized countries finding its way to the less-developed and emerging markets?

2) What is the distinction between ‘less-developed’ and ’emerging’?

The Answers

The OECD Investment Committee is designed to provide assistance for international co-operation, policy development, and offer advice to world governments on global investments. There are 30 members of the Organisation for Economic Co-operation and Development, of which, the World Bank identifies 24 as high-income countries (Wikipedia[2], 2005). Foreign direct investment (FDI) has grown considerably in the last 20 years (GPF, 2003). During World War II, the United States dominated the global market place in regards to FDI. The first graph, below, shows a rise in FDI in the 1990s, however, it would appear that the majority of the monies were transferred between the rich nations, most likely the G8. The second and third charts illustrate the funds for private investment versus official investment. The primary source of global capital investments seems to becoming from private enterprise versus official development assistance. This means that less and less of what the monies are used for will be under the control and guidelines of organizations such as the OECD.

A developing country has “a low income average, an undeveloped infrastructure, and a poor human development index” (Heakal, 2005). Countries in this category have also been known as “third-world” countries. An emerging market economy can be described as “having an economy with low-to-middle per capita income, which includes about 80% of the global population, representing about 20% of the world’s economies” (Investopedia). An EME is a transitional market. This means that the country is moving from a closed economy to an open one. Moving from a closed economy allows the EME to expand its global business transactions and thereby increase its overall economic position in the world.

(O’Connor, 2000)

(O’Connor, 2000)

Foreign Direct Investment Inflows and Outflows, by Region

References

Global Policy Forum. (2003). Foreign Direct Investment, Inflows and Outflows, by Region 1970-2001. Retrieved November 20, 2005 from: http://www.globalpolicy.org/globaliz/charts/fditable.htm

Heakle, R. (n.d.) What is an Emerging Market Economy? Investopedia.com. Retrieved November 20, 2005 from: http://www.investopedia.com/articles/03/073003.asp

O’Connor, D. (2000, July). Global Capital Flows and the Environment in the 21st Century. OECD Development Centre. Retrieved November 20, 2005 from: http://www.oecd.org/dataoecd/38/24/1922946.pdf

Organisation for Economic Co-Operation and Development (OECD). (2005). Revision of the Benchmark Definition of Foreign Direct Investment. Retrieved November 20, 2005 from: http://www.oecd.org/document/33/0,2340,en_2649_33763_33742497_1_1_1_1,00.html

Wikipedia[1]. (2005). Foreign direct investment. Retrieved November 20, 2005 from: http://en.wikipedia.org/wiki/Foreign_direct_investment

Wikipedia[2]. (2005). Organisation for Economic Co-Operation and Development. Retrieved November 20, 2005 from: http://en.wikipedia.org/wiki/OECD#Members