Theory and Practice
New Horizons in International Business series
Chapter 1: Introduction
GLOBAL TRENDS FOR SERVICE FDI Following the enforcement of the World Trade Organization (WTO) agreement, particularly the General Agreement on Trade in Services (GATS), the continuous process of liberalization of foreign direct investment (FDI) policies and deregulation of key service industries has led to large inﬂows of FDI into industries that were previously dominated by the State or domestic private sector ﬁrms. As the transnationalization of the services sector in home and host countries lags behind that of manufacturing (Dunning, 1993b), there is scope for a further shift of FDI towards services. The past three decades have witnessed the shift of FDI ﬂows from manufacturing towards services. There has been a decline in the manufacturing sector in total FDI ﬂows and stock in recent years. This is the same scenario for both inward and outward FDI, and in all groups of economies. The services sector continues to capture an increasing share of FDI. Services gain the most from the surge of FDI, particularly ﬁnance, telecommunications and real estate (UNCTAD, 2007). By 2002 services accounted for about 60 per cent of the world FDI stock, compared to less than half in 1990 and only one quarter in the early 1970s. The world’s inward stock of services FDI reached an estimated 4 trillion USD. During 2001–02 FDI inﬂows in services were valued at approximately 500 billion1 USD (UNCTAD, 2004). As an emerging trend of world FDI, investment ﬁrms, collective investment institutions and schemes including private equity ﬁrms and various...