WASHINGTON, D.C., Feb. 17 -- According to a new study by the International Finance Corporation (IFC) -- the private sector member of the World Bank Group -- private investment has surged in a number of countries in the developing world. The study is titled Trends in Private Investment in Developing Countries 1993 and was co-authored by Guy Pfeffermann, Director of IFC's Economics Department and Economic Adviser to the Corporation, and Andrea Madarassy, a research economist in the same department. Said Pfeffermann, "Today, investing in developing countries can be more advantageous than investing in industrialized countries. Developing countries offer lower production costs and allow investors to create competitive operations." The report notes that "private investment levels are back to their peak of the late 1970s and in a number of large developing countries are surpassing this peak." In 47 developing countries studied, private investment between 1970 to 1991 increased by 16.4 percent. Meanwhile, "public inv
estment remains at a ten-year low." Investment varied across regions with East Asia in the lead (mainly Malaysia and Thailand). Private investment also rose in Eastern Europe (Hungary and the former Czechoslovakia) and Latin America (Chile and Mexico). Investment in South Asia increased slowly but remained low. Sub-Saharan Africa recorded the lowest levels of investment, although Malawi and Ghana showed some recovery. Foreign investors tend to invest in countries that have large and expanding markets. Between 1985 and 1991, for instance, more than half of the foreign direct investment in the developing world went to countries with the largest markets: Mexico, China, Malaysia, Argentina, Brazil and Thailand. (More) IFC Press Release 93/46 Page Two The study explains why East Asian economies have been so successful in attracting high levels of investment. The reasons given are "first-rate" macro-economic policies, the education of workers, and institutions supportive of private sector development. The most seri
ous obstacles to private investment are listed as "inadequate administration of justice, deficient property rights, frequent political interference in private business, corruption and excessive red tape" as well as "inflation and exchange rate volatility." To increase private investment significantly, improvements in macro-economic conditions and the quality of institutions are considered essential along with an "open export-oriented economy," a "convertible currency" and a "large-scale privatization program." (30)
