FDI 'would rocket with better rules'

PUBLISHED : Friday, 14 November, 2003, 12:00am
UPDATED : Friday, 14 November, 2003, 12:00am

The nation's foreign direct investments, the world's highest, could skyrocket if the government created an independent judiciary, cracked down on graft and increased transparency, a leading economist said yesterday.

Ken Davies, of the Paris-based Organisation for Economic Co-operation and Development (OECD), said China's foreign direct investment (FDI) of US$52 billion last year worked out to only $40.62 per capita, far below the average even for developing economies around the world.

Malaysia, for instance, received $162.80 on a per capita basis in 2000, the last year statistics were available for a recently published OECD study. Thailand received $54 per capita in FDI that year. On average, the 30 member states of the OECD received $1,320.90 of FDI on a per capita basis.

'If China wants higher quality investments, more long-term hi-tech, capital-intensive investments, especially in services, not just manufacturing, then it has to create a rules-based business environment,' said Mr Davies, author of a recent OECD study on FDI inflows into China.

'It's not that China doesn't have enough rules. Quite often it has too many rules, and having too many rules isn't a good thing. It means having a clear, transparent business environment in which things are predictable.'

Mr Davies, speaking at a Foreign Correspondents' Club gathering, said top officials must work harder to create a corruption-free, independent judiciary. In addition, the government must try to cut the level of bureaucratic red tape that often clutters the application process for both foreign and domestic private investors. It must seek more public consultation before implementing laws, especially from the private sector and non-governmental organisations. 'There needs to be more transparency in legal formulation,' he said.

The recently published OECD study, Investment Review of China: Progress and Reform Challenges, written at the behest of the Ministry of Commerce, gives senior officials an outsider's perspective on how the nation can go about attracting more FDI.

'We hope out of this process we will get special dialogue - more high-level dialogue delegations coming to Paris - to share views on how China can attract even more investments in the years ahead,' Mr Davies said.