BRIC Countries and Foreign Direct Investment: From IDI to ODI

Abstract

In this chapter, we overview aggregated Foreign Direct Investment (FDI) originating (directed) from (to) Brazil, Russia, India, and China (BRIC). The last 20 years have witnessed BRIC countries become an important hub for FDI. In 1995, BRIC countries attracted 13.5% of world Inward Direct Investment (IDI) flows and accounted for 4.5% of world IDI stocks. In 2016, they became the destination for 15.7% of world IDI flows and accounted for 10% of world IDI stocks. Regardless of how striking these figures may appear, BRIC countries’ performance in terms of Outward Direct Investment (ODI) has been even more impressive. In 1995, BRIC countries contributed 1.1% to world ODI flows and 1.7% to world ODI stocks. In 2016, they accounted for 14.2% of world ODI flows, and their share in world ODI stocks peaked at 7.4%. We argue that these patterns are consistent with the Investment Development Path model, and help explain how BRIC countries have turned from IDI recipients to ODI promoters. Next, we provide individual country overviews. To this aim, we discuss the evolution of FDI in BRIC countries and highlight the features of FDI policies—if any—governing and supporting FDI.