ABSTRACT
Globalization of economic activities has been accelerating rapidly as cross-border movements of goods, money, and people have expanded in recent years. In the post-World War II period until the early 1980s foreign trade was a major means of globalization of economic activities, while foreign direct investment (FDI) did not play a significant role. However, since the mid–1980s FDI has increased its importance as a vehicle of globalization (Figure 3.1). Indeed, the value of world FDI outflow increased twenty-two times in seventeen years from 1982 to 1999, while world exports increased only slightly more than three times. Despite the rapid expansion of FDI in recent years, its magnitude in flow terms is still significantly smaller than foreign trade. In 1999 world FDI outflows were approximately one-ninth of world exports of goods and non-factor services (United Nations, 2000; see Table 3.1). Having noted a relatively small magnitude of FDI in relation to foreign trade, it is important to be reminded that a large portion of foreign trade is conducted by multinational enterprises (MNEs) which undertake FDI. Indeed, in 1999, exports of foreign affiliates of MNEs accounted for approximately 46 percent of world exports (United Nations, 2000).
