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Capital Flows and Development: Lessons from South Asian Experiences

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  • Nagesh Kumar

    (Chief Economist, United Nations Economic and Social Commission for Asia and the Pacific)

Abstract

Foreign capital flows have emerged as key channels of global economic integration all across the world over the past two decades. While foreign direct investment (FDI) flows have been undertaken for a long time by multinational enterprises (MNEs) in the course of their overseas expansion, foreign portfolio investments (FPI) representing equity and debt flows unaccompanied by management control have become highly visible and often dominant components of the foreign capital flows in recent years with the rise of foreign institutional investors (FIIs) and sovereign wealth funds on the horizon that seek to make quick returns through short term speculative activities abroad. This paper summarizes the experiences of South Asian countries in attracting FDI and FPI and reviews recent trends, patterns and prospects for these flows and their developmental impact. As the region emerges as a source of FDI as well, the paper also briefly touches upon the trends in these flows and concludes with some policy lessons.

Suggested Citation

  • Nagesh Kumar, 2010. "Capital Flows and Development: Lessons from South Asian Experiences," MPDD Working Paper Series WP/10/11, United Nations Economic and Social Commission for Asia and the Pacific (ESCAP).
    • Handle: RePEc:unt:wpmpdd:wp/10/11
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    1. Theodore H. Moran, 1998. "Foreign Direct Investment and Development: The New Policy Agenda for Developing Countries and Economies in Transition," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 53, October.
    2. Manuel Agosin & Roberto Machado, 2005. "Foreign Investment in Developing Countries: Does it Crowd in Domestic Investment?," Oxford Development Studies, Taylor & Francis Journals, vol. 33(2), pages 149-162.
    3. Nagesh Kumar & Jaya Prakash Pradhan, 2005. "Foreign Direct Investment, Externalities and Economic Growth in Developing Countries: Some Empirical Explorations," International Economic Association Series, in: Edward M. Graham (ed.), Multinationals and Foreign Investment in Economic Development, chapter 3, pages 42-84, Palgrave Macmillan.
    4. Nagesh Kumar, 1998. "Multinational enterprises, regional economic integration, and export-platform production in the host countries: An empirical analysis for the US and Japanese corporations," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 134(3), pages 450-483, September.
    5. Pradeep Agrawal, 2005. "Foreign Direct Investment in South Asia: Impact on Economic Growth and Local Investment," International Economic Association Series, in: Edward M. Graham (ed.), Multinationals and Foreign Investment in Economic Development, chapter 5, pages 94-118, Palgrave Macmillan.
    6. Saman Kelegama & Indra Nath Mukherji, 2007. "India-Sri Lanka Bilateral Free Trade Agreement : Six Years Performance and Beyond," Trade Working Papers 22104, East Asian Bureau of Economic Research.
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    Cited by:

    1. Nagesh Kumar, 2013. "Trade, Capital Flows and the Balance of Payments," Development Papers 1303, United Nations Economic and Social Commission for Asia and the Pacific (ESCAP) South and South-West Asia Office.

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