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WASHINGTON, D.C., Feb. 23 -- Private investment in developing countries continued a five-year upward trend in 1992. This contrasts with flat and relatively low rates of public investment over the same time period, according a recently released report by the International Finance Corporation, "Trends in Private Investment in Developing Countries 1994." East Asia accounted for the largest proportion of gross domestic product (GDP) devoted to private investment, particularly in Thailand, Korea, and Malaysia. The high levels of growth in private investment have contributed to the so-called "East Asian Miracle." In Latin America, private investment growth in Argentina, Venezuela, Mexico, and Chile led the region to its highest level of private investment since 1988. South Asia as well has increased private investment (as a proportion of GDP) every year since 1989. While private investment has been growing in developing countries, explosive growth in foreign direct investment (FDI) has been occurring. In 1992, FDI
was nearly four times investment flows in 1986 and still increasing rapidly. FDI is concentrated, with four-fifths in East Asia and Latin America. Growth in FDI in both regions has been impressive, as it has in Eastern and Central Europe (from a much lower base). As in private investment more generally, however, FDI in Sub-Saharan Africa continues at very low levels. However, a few countries, most notably Tanzania, Guinea, and Mali, demonstrated growth in private investment. "Growth in private investment in developing countries can be attributed to a number of factors," said Guy Pfeffermann, IFC's chief economist. "First, strong market growth in many developing countries at a time of recession in Europe and Japan; second, the enormous growth prospects in these countries; third, structural adjustment creating a more market-friendly environment; fourth, governments experiencing fiscal constraints inviting the private sector into infrastructure projects; fifth, massive privatization in developing countries; and,
finally, foreign direct investment in search of a lower-cost production base." (more) Press Release No. 94/61, page 2 of 2 "Trends in Private Investment in Developing Countries 1994" is the fifth in an annual series of IFC discussion papers on private investment in developing countries. These studies are unique in that country macroeconomic data typically do not discriminate between public and private investment, making it difficult to identify the importance of private investment in developing countries. IFC, a member of the World Bank Group, is the largest multilateral source of loan and equity financing for private sector projects in developing countries. (30)
Note to Editors: To obtain a copy of "Trends in Private Investment in Developing Countries 1994," please call 202-473-3969 or fax 202-676-0365.
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