Foreign Direct Investment is the key key financial indicator of globalization. In 2003 it stood at $653 billion. This may seem to be a great deal until you compare it with the $1.4 trillion that was invested in the crazy year: 2000 when money was thrown at any old fad, fallacy or futility.
The mobilization of external resources for development in the 1990s has been characterized by an increasing privatization of resource flows to developing countries. International investment flows have increased at a faster pace than world output and world trade since the early 1980s. As a result, international investment and in particular FDI has emerged as one of the driving forces in the world economy, contributing not only to the integration of markets, but also, increasingly, to the integration of national production systems. The composition of capital flows has changed, with foreign direct investment (FDI) and foreign portfolio investment (FPI) accounting for the largest shares of total net resource flows to developing countries. Since 1980, FDI flows to developing countries have climbed significantly, but are heavily concentrated in a few countries. While FDI is a more stable form of investment, FPI is often more volatile. Both types of flows have different characteristics and may have differing impacts on the development of recipient countries. This is all the more important as FDI represents a package that includes not only capital but also technology, organizational and management practices, skills and access to international markets. Countries that do not attract sufficient FDI flows are also deprived of other tangible and intangible resources which are central to development.
International capital flows have expanded rapidly, particularly foreign direct investment in developing and transition countries, which nearly tripled in the first six years of the 1990's. The importance of the private sector in this globalization is illustrated by the fact that, in 1996, foreign exchange trading by the big investors amounted to some US$350 million million, more than ten times the world's GDP of about US$30 million million. Total revenue of the top 500 companies was about US$11 million million, 50 per cent each for industry and services. Private foreign investment, concentrated in a limited number of developing countries, was about US$250 000 million, compared to overseas development assistance (ODA) of less than US$50 000 million.