Though South-South FDI is rising in recent years (particularly massive investment plans of China and India, China more so), a new report points out that political risks is a principal constraint to doing business in emerging markets. It is argued that South-based companies have higher tolerance than North-based companies to political risks.
...Foreign direct investment (FDI) originating in developing countries and destined for other developing countries is on the rise, but the growing development potential of this so-called “South-South” investment is inhibited by political risks, according to a new report by the Multilateral Investment Guarantee Agency (MIGA).
...Political risks are cited by South-based investors as a principal constraint to doing business in emerging markets. The MIGA review—“South-South FDI and Political Risk Insurance: Challenges and Opportunities”—looks at perceptions of political risk by companies based in emerging markets that are seeking to invest abroad, as well as challenges in mitigating those risks.
...FDI flows going to emerging markets are expected to reach US$535 billion in 2007, decline somewhat in 2008, and continue growing in the subsequent three years at an annual rate of 3-4 percent.
...FDI flows from emerging markets increased from US$12 billion in 1991 to US$99 billion in 2000,6 and are estimated to be around US$210 billion as of 2006.
...“South-South” FDI (investment outflows from emerging markets to other emerging markets) has been growing even faster, increasing from under US$5 billion in 1994 to over US$50 billion in 2000.