Reflections on Multinational Enterprises in a Globally Interdependent World Economy

The importance, diversity, and scope of the operations of multinational enterprises (MNEs) in the global economy have grown exponentially. In 1960, the value of worldwide sales of foreign affiliates was about one-half of world exports. By 1982, the worldwide sales of foreign affiliates totaled US$2.7 trillion, roughly comparable to worldwide exports of goods and nonfactor services of US$2.4 trillion. By 2007, worldwide affiliate sales stood at US$31 trillion, which was almost twice as much as world exports of US$17 trillion (UNCTAD 2008, 10). Two-thirds of world trade involves MNEs and their affiliates as buyers or sellers, and one-third takes place among units of the same MNE corporate system. In 1982, the ratio of outward foreign direct investment (OFDI) to worldwide gross fixed capital formation was just 1%. In 1999, it had risen to approximately 14% (UNCTAD 2000, 4), and in 2007 it stood at 16.2% (UNCTAD 2008, 10). World foreign direct investment (FDI) outward stock, expressed as a percentage of world gross domestic product in current prices, increased rapidly, from 4.8% in 1982 and 10.8% in 1990, to 28.6% in 2007 (UNCTAD 2008, 10). In fact, global FDI inflows reached a historic high of $1,979 billion in 2007 (UNCTAD 2009). Amid a global financial and economic crisis, inflows declined by 14% to $1,697 billion in 2008 (UNCTAD 2009). This decline continued into 2009, with added momentum: preliminary data suggest that in the first quarter of 2009, inflows fell a further 44% compared with their level in the same period of 2008. A slow recovery is expected in 2010, gathering speed in 2011. The crisis has also changed the investment landscape, with developing and transition economies’ share in global FDI flows surging to 43% in 2008 (UNCTAD 2009).