What worries the BRICs
Some fascinating data about the growing power of emerging markets, particularly the BRICs, was on display at the OECD‘s annual investment conference in Paris this week. Not the least of it came from MIGA, the World Bank’s Multilateral Investment Guarantee Agency, which tries to help protect foreign direct investors from various forms of political risk.
MIGA has mainly focused on encouraging investment into developing countries, but a lot of its latest work is about investment from emerging economies.
This has been exploding over the past decade. Net outward investment from developing countries reached $198 billion in 2008 from around $20 billion in 2000. The 2008 figure was only 10.8 percent of global FDI, but it was just 1.4 percent in 2000.
Not surprisingly, the lion’s share comes from the BRICS — Brazil, Russia, India and China — which together made up 73 percent of outflows last year. BRIC outward investment jumped to $144.3 billion in 2008 from $29.6 billion three years earlier.
Perhaps the most interesting data, however, concerned political risk insurance. MIGA studied the kind of insurance BRICs outward investors were taking to see what kind of things worried them.
Brazil had a mixed of concerns, but Indians were most worried about transfer and convertibility restrictions, the Chinese concerned themseves with war and civil disturbance and Russians were extremely worried about breaches of contract.
Sceptics might be tempted to see this as a reflection of national concerns. But MIGA said it was more micro than that. Russian investment, for example, is dominated by commodity exploration, an area said to be more subject to contract problems than others.